Too many start-up technology companies are seeking listings too early, while traditional organisations are adding dot.com to their names without implementing cohesive strategies, according to Davy Stockbrokers' head of corporate finance.
Mr Tom Byrne described as "ridiculous" the scenario where companies less than two years old were taking stock market listings. Mr Byrne, who was addressing the First Tuesday meeting in Dublin earlier this week, welcomed the recent shake-out of technology stocks on the US Nasdaq.
"The flight has now returned to quality companies adhering to historic qualities and principles," Mr Byrne said.
In the last month Davy Stockbrokers saw between 20 and 30 presentations by technology companies which, Mr Byrne says, were abysmal.
"There is far too much focus on public offerings, and too little on long-term business strategy. Companies must be able to present their ideas in just three pages."
Mr Byrne also warned that far too much emphasis had been placed on putting the dot.com name into traditional companies. This had given rise to a new generation of "rose com" companies in the US - "a rose by any other name".
The single biggest contributory factor to the recent Nasdaq stock exchange collapse, Mr Byrne said, was the clampdown in the US Securities and Exchange Commission (SEC) rulings on reporting procedures.
The clampdown, followed by the resultant market collapse, led to the postponement of 35 planned Nasdaq IPOs in the last month, with seven companies pulling out in one day.
Other contributing factors to the market downturn included the failure of companies with "get big fast" strategies to deliver on time or within budget.
Mr Byrne also referred to massive funds flows in the US late last year, with many fund managers grappling to invest in technology stocks to deliver the market's high performance to their clients.
"If you had a .com after your name there was plenty of money being offered. This led to the momentum of companies coming to market."
This included an overload of very young "e-tail" companies with similar business models. Mr Byrne said it had been somehow forgotten that e-tail companies operate exactly like retail companies, and had very low profit margins.
Mr Byrne predicted that later this year a lot of last year's IPO companies will run out of money, resulting in an opportunity for traditional companies to swoop and buy struggling Internet plays.
Mr Byrne also envisages a major consolidation within the industry, with 75 per cent of Internet companies eliminated in their present form, and absorbed by bigger players.
Local investment companies have also been alerted to unrealistic valuations being placed on start-ups by US advisers. These valuations are widely based on peer company comparisons, but are not being reduced in line with share price drops.
On a more positive note, Mr Byrne said there would be no shortage of money available to fund new ventures, and this year will see a lot more European investment funds turning their attention to technology companies.
In line with this he expects to see a greater emphasis on venture capital funding this year, and a move away from fund-raising through brokers.
