They should quadruple in the next four years as old economy companies move to the web in order to communicate and transact with suppliers and customers. These firms smartly waited and let the equity markets fund intense capital burn rates by the pioneering companies as the Internet evolved. The driving force behind all these developments, of course, is innovation in computer hardware, telecommunications equipment, and software. This results in a constant flow of new productivity-enhancing products and helps maintain profitable selling prices in a very competitive industry for the winners with superior products, that is. Often they have considerable international sales, resulting in foreign exchange risk.
Dilution is another concern.
Use of stock options can be excessive. Stock valuations are generally high, which frequently results in extreme price volatility. Lastly, deep-pocketed hardware companies tend to intrude in the software space. Intense industry competition is a final, and recurring, concern for investors. One need only witness the notorious rivalry between Oracle s Larry Ellison and Microsoft s Bill Gates to understand this clash of business and egos.