Old and new firms swap images

Despite the fact that the Nasdaq can bare its teeth in the summer by falling nearly 500 points in a week, trading in European markets is, by all accounts, fairly thin. Indexes are moving up and down, but on rather dismal volume and influenced by a small number of components.

There are days where everything is bid-only, followed by days when there's loads of stock on offer and not a bid to be seen. That's probably why you're advised to sell in May and go away.

But there have been plenty of events over the last few weeks to keep people interested if not actively trading. The banking industry both at home and abroad is having a difficult time and the executives of Dresdner must be wondering what they have to do to eventually complete a merger following the breakdown of their talks with Commerzbank. To fail with one might be considered misfortune, to fail at two, shareholders will get pretty peeved.

I wasn't all that surprised when the Dresdner/Deutsche merger didn't come off at the beginning of the year although not for any tangible reason. I always felt that the ethos of both banks was quite different, although my own experience of them was solely in the trading areas where, despite my feelings that they were poles apart, I regularly mixed up their names on the tickets I wrote. I don't think I was the only one. A merger would've helped the back-office staff immensely! Not surprisingly, Dresdner's share price fell after the announcement and after it also announced that earnings were down by 20.7 per cent. It all has the stamp of confused management at this point and analysts are suggesting that Dresdner may break up different divisions within the company which seems the only route left open to it.

Confusion, too, at Barclays where its attempts to be more new-economy by offering Internet banking to customers took a blow as a security problem meant that accounts could be seen by the wrong people. Whatever else goes wrong with banking, security is the big one.

But the old-economy banks aren't the only ones struggling during the summer as Egg, the Pru's Internet bank, reports a falling customer base and a share price which is down nearly 25 per cent since its flotation in June. This is actually quite horrible since Egg isn't a new technology haven't-got-a-clue-what-we-do-really type of company. Its a bank which attracted customers by offering high levels of interest rates.

Now there are other Internet banks doing the same thing and Egg has found that its customers are happily clicking elsewhere. So much easier to move your account from a cyber-bank where you've never met the staff and couldn't care less what happens to it.

The technology revolution is making a big thing about offering consumers better value and greater choices but the problem with that is that there's always someone else trying to grab your customer. There's now a whole generation of people for whom the concept of building a relationship means nothing at all. And the companies concerned are finding that they're having their 15 minutes of fame while their product is the sexiest in the industry only to find that it's yesterday's news as quickly as, well, yesterday.

What's interesting now is that the old economy companies are all desperately trying to tap into the cyber-customer while the new economy companies are now trying to appear long-term and trustworthy.

I rather like Amazon.com's television advertising campaign and I'm sure it'll bring them a few more customers in Scotland if nowhere else - but they're really struggling to keep it all together. The shares continue to trade dreadfully and things weren't helped by the resignation of the chief operating officer, Joe Galli, who'd only been with them just over a year. Jeff Bezos, the chief executive has said that he won't be replacing Mr Galli which will save the company some dollars, but not enough to keep shareholders happy.

The problem, of course, is not entirely of Jeff's making. Back when people laughed at you if you queried the valuations being put on companies like Amazon, it was easy to lose sight of the fact that it was trying to become a long-term participant in the retail market.

Yes, the valuations were crazy for an outfit that people are now delighting in calling a mere mailorder company. But the franchise is a good one. Like Egg, though, just because you were the first doesn't mean that people will stick with you. Sales in books and music, while up 38 per cent year on year were actually down 4 per cent in the second quarter. Amazon had set a target for year on year sales to increase by 90 per cent.

And so now investors are looking at things like costs and profitability and are asking the hard questions that they didn't want to ask this time last year. And analysts are cutting their ratings to things like "neutral" or "hold". In the surreal world that is analysts' ratings, both "neutral" and "hold" imply that the stock is going down some more. Meanwhile, the cost of borrowing is going up and most of the e-tailers are struggling to find money in the capital markets at a time when so many of them are starting to run out of cash.

Another one to bite the dust is Clickmango.com which was being heavily advertised the last time I was in London and was featured on one of the many TV programmes about Internet companies (probably because they'd landed Joanna Lumley to promote it - apparently she invested in it too). Anyway they were a kind of online Body Shop but they've nothing left in the kitty and had little hope of raising funds in the current climate.

On a (slightly) more positive note, letsbuyit.com finally managed to complete its IPO at €3.50 (£2.76) - a far cry from the €15 they'd hoped earlier in the year. The group is valued at around €320 million and it currently supposed to be spending €8 million a month on staffing, developing and the all important advertising.

Actually it's advertising campaign is another one that I like and the site isn't bad either (despite the fact that the name has probably rendered a whole new generation of people ignorant of the use of the apostrophe). One of the most popular items is a pale blue pashmina at £74 which is a tad worrying for style gurus - pashminas were last year's must-have.

I hope that letsbuyit.com manages to hang in there until 2003 - that's the earliest it expects to be cash flow positive. Hopefully, too, its old-style bankers will be supportive. Though I wouldn't hold my breath.