Wall Street's love-hate obsession with the Internet has taught technology companies that hype about electronic commerce is no substitute for realism.

When Netscape Communications Corp. shocked the world with its initial public offering of stock in 1995-instantly making it one of the biggest publicly traded firms in terms of market capitalization-a handful of emerging electronic-commerce companies quickly followed suit.

And why not? Investors viewed the Internet's emergence as a technological innovation akin to the introduction of the telephone or television. Pundits both on and off the Street predicted a revolution in the way consumers and businesses would interact.

But Internet software companies like Netscape, which made its name with browser technology, were only part of the equation. Others that could create electronic links between buyers and sellers would supposedly become money machines as they shaved pennies off each of the expected millions of daily on-line transactions.

Well, the predictions of an explosion in Internet-based commerce are still just that, and investors have experienced a nasty case of financial whiplash as a result.

Electronic commerce specialists that issued stock during the Internet gold rush-Checkfree Corp., Cybercash Inc., Edify Corp., Harbinger Corp., and Sterling Commerce-saw their share prices skyrocket at first. But they plunged back to earth when earnings-or the lack thereof-disappointed Wall Street expectations.

"At first, people starting hearing big numbers, and the controlling figure that was going around was that Internet commerce in terms of transaction volume would be a $50 billion industry within five years," said Ned Davis, an analyst at Lazard Freres in New York. "In fact, maybe it was a $300 million dollar business last year."

Despite the megahype, Mr. Davis said, the extreme volatility in electronic commerce companies' stock during the past 18 months actually is not that much different from any emerging-technology business that goes public. Remember biotech companies in the 1980s?

"In the last nine months we've gone from 'I want anything with Internet associated with it,' to more of a reality check," Mr. Davis said.

What is lost on most investors is that electronic commerce predates the emergence of the Internet, Mr. Davis said.

He cited two firms, Atlanta-based Harbinger and Dallas-based Sterling Commerce, that vend electronic data interchange software used by businesses to transmit purchase orders, invoices, and remittance data over private networks.

"EDI overall is about a $1.5 billion business" in the United States alone, Mr. Davis said.

Now that Wall Street's expectations have been cut down to size, electronic commerce companies' business strategies are following suit.

"A lot of companies before they went public brashly said, 'We're going to become the standard way to do this type of transaction'," Mr. Davis said. "What the intelligent companies are doing now is looking how to build a business model with a more limited scope."

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