Gartner gives most dotcoms a year to live

The majority of newly formed dotcom companies around the world will fail in the next 12 months, as the online bubble begins to burst.

Speaking at Gartner's Spring IT Symposium in Florence today, analyst Alex Drobik said: "At the moment we are in the 'e is best' scenario, but we are starting to see the first signs of disillusionment."

Gartner predicts that 95 to 98 per cent of newly formed pure dotcom companies will fail in the next year.

"With flotations such as Lastminute.com and World Online we have seen them struggling to raise their share price," said Drobik.

Online retailer Lastminute.com recently disappointed thousands of would-be investors when its initial public offering was massively oversubscribed. Registered subscribers to Lastminute.com's service who applied for shares only received shares worth a total of £133, based on their 380p issue price.

The weak debut of Lastminute.com sparked fears of a dotcom fallout among many private investors, and technology shares across the board dropped as a result.

World Online, which floated in mid March, suffered a similar fate as its share value dived as private investors rushed to sell stock because of fears that the dotcom market was about to crash.

The company is now battling to defend itself as reports indicate that chairwoman Nina Brink may have sold stock in the run up to World Online's $2.76bn (£1.73bn) flotation. Brink had previously said she would not be selling any of her stock.

"These dotcom models cannot last," said Drobik. "We are at the beginning of a dotcom shakeout where economic reality will take over."

Drobik said that during the next few years there will be further investor disillusionment, and failures in dotcom ventures and in 'bricks and mortar' companies that fail to take ebusiness on board.

"However, by 2006 to 2008 the whole issue of ebusiness will go away," he said. "It will be so embedded that if you took it away, then a company would not work - just like the telephone is today."