The Week Ahead >> Seeking balance - table - Industry Trend or Event - Statistical Data Included

Where is that happy medium for dot-com companies? Last year's orgy of funding is over. Stock prices, staffing, optimism and damn near every, thing dot-com-related has gone from complete tulip mania to total meltdown.

Dot-coms have gone from darlings to dogs. Barron's cash burnout rankings and FuckedCompany.com are required reading. The yet-to-be-revealed truth is somewhere in the middle. We know that none of these dot-coms casualties were worth last year's valuations, but they aren't completely worthless either.

"When anything gets overhyped there's a backlash," says Fred Wilson, a partner at Flatiron Partners. The New York City venture capital firm helped fund TheStreet.com, StarMedia and Multex.com. "Public markets aren't valuing these companies fairly on the upside or the downside."

A trip to Silicon Alley's annual CyberSuds schmooze fest Sept. 30 revealed a different vibe from a year ago, when wannabes with wacky Web ideas were talking initial public offerings, paper fortunes and stardom. This year, folks were crowding around the IBM recruiting booth. "They know we'll be around," one IBM recruiter said.

Now alleged leaders in the dot-com world, such as Priceline.com (Nasdaq: PCLN), hope to hold $10 per share after a revenue warning.

Some dot-coms, such as Pets.com, Drkoop.com, are struggling to keep stock prices above $1. Secondtier dot-coms such as iVillage (Nasdaq: IVIL) and TheStreet (Nasdaq: TSCM) hope to hit the $5 mark.

Reality is in between. Flatiron's Wilson, chairman of TheStreet's board, says he considers the financial news provider a real company. "By all market measures, it hasn't been a success," he says. "But is a company with strong year-over-year growth and 2 million page views every day a failure? Its failure has been living up to expectations." As for fair value, Wilson says the company is "closer to fair value now than when it was at $70."

The happy medium may be six months away, but dot-coms will get there and the survivors will be better companies for it. Let's look at some of the implosion points and how companies are finding balance.

* The layoffs. Common sense says they were overstaffed to begin with. When you have venture capital and hopes for lots of public money, why bother with the lean-and-mean approach?

* The people. At first, you were a pioneer. You were cool and flaunted goofy job titles such as "information architect." Now you're wondering when the axe will fall. The happy medium: realistic employees.

* The valuations. Here's Wall Street's conundrum: How do you value a company that should never have gone public in the first place? The reply increasingly is to pummel the company into bankruptcy. Is Garden.com worth the 70 cents it trades at today, or the $12 initial public offering price last September? The truth is somewhere in the middle.

StartingLine

* Oct. 10: Yahoo! reports third-quarter earnings. Consensus: 12 cents

* Oct. 11: Redback Networks reports third-quarter earnings. Consensus: 2 cents

* Oct. 12: Iomega reports third-quarter earnings. Consensus: 5 cents

Larry Dignan is Editor-in-Chief at ZD Inter@ctive Investor (www.zdii.com). He can be reached at larry_dignan@zdnet.com.

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