From: dalvan@mediaone.net
To: rick.buy@enron.com
Date: 2001-12-28 02:06:00+00:00
Subject: Merry Christmas & a Happy New Year!!!!

Thursday, December 27, 2001

Richard B Buy
Enron
,   

Dear Richard

Here's to wishing you a Merry Christmas and a Happy New Year!!!!! I 
think that 2002 is going to be a much better year than 2001!!!!!

Here's a great article from the most recent issue of Fast Company. All

indicators point towards a turnaround.

PS I apoligize if you got this email message twice;  I have two email

databases and they overlap.

Dal Coger
Tsunami Partners
781-874-0527

Digital Matters - Issue 52
Most everyone has written off the dotcoms. Smart investors are finding
the 
real value.
by Fast Company
illustrations by Jack Unruh
from FC issue 52, page 74
Alt Text

Every nine months McKinsey and Co., the world's premier management 
consultancy, publishes an "e-performance" survey of more than 200 Internet

businesses around the world. These dotcom companies have combined revenues

of roughly $2 billion. The most recent survey, published in May 2001,
found 
that 20% of the companies covered were profitable and that a significant

number of the others were heading in that direction.
Dotcoms that were making money were "e-tailers," with clothing e-tailers

doing particularly well. Companies that were losing money were content

sites; news and sports sites were struggling the most. Monika Kubicova,
one 
of four McKinsey consultants who oversee the survey, told the Financial

Times, "For e-tailers there is quite good reason for optimism, with a

reasonable number starting to show profitability. Content businesses,

however, are still playing with their business models and are in the red."
The McKinsey survey received virtually no press coverage, because it did
not 
fit the major media's prevailing conventional wisdom, which is that the

Internet sector in general -- and the dotcom sector in particular -- is
as 
dead as smelts. But as the survey makes clear, for something so dead,
these 
sectors are showing all kinds of life. This past July, a streamlined 
priceline.com announced that it had turned a second-quarter profit. Google,

the search-engine site that is now run by former Novell wizard Eric Schmidt,

recently announced that it was solidly profitable. EBay, Travelocity.com,

and a host of other companies also reported strong second-quarter earnings.

All of these solid performances occurred in the teeth of a global economic

slowdown.
Indeed, the big, largely unreported summer story of 2001 was the renewal
of 
financial interest in all things related to the Internet. Goldman Sachs
and 
other major investment houses swarmed across Europe, bottom-fishing among

distressed telecom and wireless properties. Deal flow in 
Internet-infrastructure companies quickened in the United States as price

points became much more "realistic." Even seemingly doomed content companies

such as Salon.com attracted funding.
A couple of years from now, people will look back on the summer of 2001
as 
the time when the music started up again. Dan Burstein, a managing partner

of Millennium Technology Ventures LP ( MTVLP ), is one among many smart

investors who see the wind shifting. For almost 15 months, Burstein says,

MTVLP didn't see a deal that was worth the price of admission. In fall
2000, 
MTVLP knew of one that was priced at $1 billion. By spring 2001, that
exact 
same deal was valued at below $100 million. At $1 billion, the deal was
an 
almost perfect metaphor for Internet insanity. At below $100 million,
it was 
a good investment. MTVLP bought a stake. Burstein sees the current situation

as analogous to the savings-and-loan crisis and the great real-estate

collapse of the late 1980s to early 1990s. The S&L meltdown led to 
write-offs of more than $500 billion and caused a meltdown in the 
real-estate sector. At the time, there was much talk about "overcapacity"

and "glut" in the real-estate mark!
ets. Today, the telecom industry may have to write off anywhere from $300

billion to $1 trillion in bad debt. And that has caused severe distress
in 
the Internet-infrastructure world.
Having worked at the Blackstone Group LP prior to setting up MTVLP, Burstein

has good institutional memory of what a big opportunity looks like. Under

the direction of former commerce secretary Pete Peterson, Blackstone 
surveyed the wreckage of the S&L/real-estate crisis and decided to establish

a separate entity to get in on the action -- even though Blackstone had
no 
prior experience in real-estate investing. The company ended up buying

packets of properties, and when the market revived in the latter half
of the 
1990s, Blackstone sold them off at a staggering profit. Burstein thinks
that 
the telecom and Internet shakeout of the past two years is an investing

opportunity of similar size and scope.
Consider the prevailing wisdom that there is a bandwidth glut. You can
read 
a thousand research reports on the Internet, and invariably you will find

someone whining about this glut. It is certainly true that the information

superhighways running down the fiber-optic lines between major metropolitan

areas are, for the moment, underutilized. But does that mean that they
will 
be underutilized in five or seven years?
The likely answer to that question: Of course not. Pervasive computing
means 
that new appliances, new security systems, new HVAC installations in 
buildings, whether commercial or residential, will communicate with server

farms to exchange information constantly. Peer-to-peer technology will
have 
computers talking back and forth to one another, constantly updating 
information for millions of end users. Gaming will continue to grow and

become for the echo-boom generation what television was for the baby 
boomers.
All of these technologies will be added to an ever-growing traffic flow
of 
email, messaging, searches, and business communications. Enabling all
of 
this technology will require enormous amounts of bandwidth and gargantuan

amounts of what George Gilder calls "storewidth": the response time between

entering a request on the Web and getting back the first page. Bandwidth
and 
storewidth companies have been hammered over the course of the past 18

months, to the point where they are now selling at relatively reasonable

prices. Like the real-estate glut of the late 1980s, the bandwidth glut
of 
the early 2000s is almost certainly a temporary phenomenon. So it's not

surprising that major investment houses are scouring the countryside,

looking at Internet-infrastructure companies that will enable the coming
of 
all of these new technologies.
It will take a number of years before we know which investors made the
right 
bets. The secret of business success is that much of it derives from luck

and timing. But after 18 months of virtually no activity, with huge pools
of 
investment money sitting on the sidelines in cash accounts, the great
game 
has quietly restarted. Investment companies are back at the table placing

their bets. And the biggest bets are being wagered in the beleaguered

telecom sector, which makes sense. European telecoms in particular overpaid

for spectrum licenses and, in doing so, jeopardized their franchises.
Now 
they must sell off key assets to stay afloat. Those assets are selling
at a 
significant discount. Situations like that attract big money very fast.
The next wave will occur in the Internet-infrastructure sector as companies

with strong market positions but weak cash flow hit the wall and grow

desperate. The last wave will be in a whole range of dotcom companies
-- 
especially shopping bots. As peer-to-peer computing advances, shopping
bots 
will not only be able to find you the best price on any given item, but
they 
will also give you the ability to auction out your business. Kids need

back-to-school clothes? Bid your business out on the Internet, and the
Gap 
will have to offer you $1,000 worth of merchandise for $850. If it doesn't,

Target will.
Ever since April 14, 2000, the question has been, When is this thing (
the 
Internet business, for lack of a better phrase ) going to turn around?
The 
answer is in that McKinsey survey and in the behavior of some of the world's

leading investors: It's turning around now. If the S&L/real-estate crisis
is 
a suitable analogy, it'll take about five years to get from here to there.

Along the way, there's lots of money to be made.
John Ellis ( jellis@fastcompany.com ) is a writer and consultant based
in 
New York.
Dal Coger
Tsunami Partners
Executive Search & Selection
Ph # 781-395-2981
Ph # 781-874-0527
Cell 781-718-8397
Fax 781-395-2719
wireless email 7817188397@msg.myvzw.com
web site http://tsunamipartners.tripod.com






Sincerely,



Dal Coger
Principal