Area high-tech firms distance themselves from the dotbomb mess.
By: Susan Briggs
When the first tremors of the dotbomb fiasco began to be felt late last year, area companies were caught up in the hysteria that quickly swept through the high-tech sector. Before the bottom began to fall out of the dotcom market, publicly held companies in the high-tech sector with stock prices of $50 or more per share saw the paper value of their companies plummet to $4 or less per share.
These innocent corporate bystanders were literally tarred with the same brush as the dotcoms with many in the national media and elsewhere proclaiming the end of the high-tech boom, pushing bad news into the realm of the cataclysmic.
But amid all the doom-and-gloom forecasts for companies that provide high-tech products and services, there are Princeton area firms that are continuing to thrive and stay focused on their long-term business plans.
Take ITXC Corp. The company that "provides communication in all its variations over the Internet voice as data on a new network" just moved into its new corporate headquarters at 750 College Road East in Plainsboro. Leasing two entire floors and subleasing part of a third floor, ITXC hasn’t let market gyrations impede its plans for long-term growth or the company’s focus on its business plan, said Mary Evslin, ITXC vice president of marketing and customer success, who runs the company with her husband, Tom, the chairman and CEO.
ITXC made the commitment to lease its new office space last year at around this time when the company was hiring between five and six people a week. Now, even though ITXC is currently hiring about five people a month, Mrs. Evslin said she and her husband were confident the company will continue to grow into the future, justifying the expense of the expanded office space.
The company employs about 195 people at its Princeton headquarters in addition to about 40 more employees around the world.
"Wall Street wants only one thing out of a company today," Mrs. Evslin said, "to be cash-flow positive as soon as possible. The street is now telling us to be more careful, thoughtful and bottom-line oriented."
As a result of this renewed emphasis on profitability, Mrs. Evslin said ITXC has put a temporary hold on what she called "sexy, high-end" products that were earmarked for sale in the United States and Western Europe, a channel that she said is now in disarray. "Instead, we have renewed our focus on becoming a global telecommunications company in developing countries,"she explained. "To keep margins up, we are doing even more business internationally."
Princeton Internet Group (PInG) in West Windsor is another company that has felt the effects of the dotbomb phenomenon even though PInG is a consulting firm that helps companies in almost any industry manage information technology and multimedia applications.
"We incorporated in May 1995, long before the dotcom boom took off," explained Mark Meara, partner and co-CEO at PInG. In fact, Mr. Meara said, he and four colleagues had begun to discuss forming an IT/Internet consulting firm in 1994 when the World Wide Web hadn’t even gone mainstream yet.
"We knew the Web was going to take off," explained Mr. Meara. "What we didn’t anticipate was what the Web would do to the high-tech market. The monetary success of the dotcoms was a surprise to us." In fact, he said, dotcom clients were and continue to be less than 10 percent of PInG’s client base.
But even though PInG had never focused on dotcoms as a major target for the company’s services, the dotcom bust has affected the company’s business strategy, at least in the near term.
"Until this year," Mr. Meara said, "we really didn’t have to market ourselves. Our phones were ringing off the hook with potential customers. In the past, we relied on word of mouth to build our business and literally had no salespeople."
But in early 2001, PInG hired its first on-staff business development professional and also is relying on the advice of consultants to grow the company. "Companies still need our services," Mr. Meara said. "Earlier this year, there was corporate purse tightening. But third-quarter sales have been picking up."
One thing Mr. Meara doesn’t have to worry about is PInG’s stock price because the company is still privately held. But publicly owned companies like ITXC, which successfully launched its initial public offering in September 1999, have an additional burden to carry in this time of market flux a stock price that doesn’t reflect the true value of the company.
Switchboard.com was launched in March 1999 as a free Internet-based search engine that allows users to access telephone directory information anywhere in the United States or Canada. In March 2000, the company went public.
"Switchboard.com is a healthy, well-financed and well-managed company with 300 months of operating capital at its disposal," said Gretchen Roede, president of Newtown, Pa.-based Garfield Group Public Relations, which represents Switchboard.com as well as other Internet, eBusiness and software companies. "Yet the company’s stock price rose from $15 per share at the time of its IPO to its high of close to $50 a share a little over one year ago and is now down to around $4 per share. There is no business reason for that valuation; nothing has changed except perception."
Indeed, Ms. Roede said Switchboard.com’s stock price was heavily affected by the dotbomb phenomenon "even though its revenue was provable and the company had and still has great partners like America OnLine and the U.S. Postal Service."
Taking a proactive stance, Ms. Roede said Garfield Group knew in advance of the general public that the dotcom bubble was about to burst and advised its clients accordingly.
"We make our business off what the media is covering," she explained. "When the tenor of the dotcom coverage began to change in industry publications, we knew there was about to be a market correction. These publications report the possibility of market downturns in specific industries much sooner than the Wall Street Journal does. Because we follow industry publications, we had an early warning system in place that let us know the dotbomb was coming and we advised our clients of that fact."
Cutting marketing and advertising budgets in economic downturns is the worst thing any company can do, said Ms. Roede. When the dotbomb crisis began to develop, she said Garfield advised its clients to be proactive, not defensive.
"What we advised our clients to do was to communicate their company’s true benefits," she explained. "You can’t afford to shut up in a bad time; you’ve got to get your story out there."
And under the heading "turning lemons into lemonade," Ms. Roede said the smartest companies are maneuvering to ensure that they will be around long after the dotbomb smoke has cleared.
"Now is the time to make real moves in market share," she said. "Now also is the time for any company to thoroughly plan its marketing communication strategies and I am happy to say that most high-tech companies are now beginning to realize that."

