Volatility wipes shine off shares in dot.coms

One of the serious knock-on effects of the current volatility is that technology company employees may question the value of receiving shares when they join a firm. This could make it much more difficult for cash-tight start-up companies to find and hold staff.

Once a perk enjoyed only by management and senior programmers in Silicon Valley, a tight job market and technology industry boom have made shares an expected element of a jobs' package. In the US, shares are routinely offered to everyone within a company, from office clerks and secretaries to phone help-desk staff.

In the Republic, shares are increasingly a technology industry norm. "The question of options just comes up in job discussions," says Mr David Neville, director of Internet networking group First Tuesday Ireland.

Mindful of the small - and large - fortunes US employees have made from shares in the hyperactive technology market of recent years, Irish workers are eager for similar opportunities.

"Five years ago no one wanted to join Irish software companies. They all wanted to join multinationals - they were seen as safe," says Ms Liz Neligan, director of Dublin recruiting firm CSR. "But a new breed now wants to join pre-IPO Irish companies," she says - for the shares.

But shares, especially in the uncertain dot.com sector, have lost some of their shine. Newspapers in Silicon Valley are full of stories of anxious Internet company employees worrying over the plunging value of their options following the Nasdaq's April 14th dive. Mr Neville says technology employees here are also becoming jittery.

"I think people are going to start demanding what they think they're worth, not options," he says. "They'll think, you're better off on a good salary."

This could pose serious problems for start-ups, which typically offer a small starting salary accompanied by the carrot of a large chunk of options to employees who come on board early on.

"The cost of starting up is going to be higher," says Mr Neville. He also believes start-ups will have a hard time holding on to employees if they are headhunted by more established technology firms.

But many welcome the market's forced revaluation of the role of shares. Mr Tom Byrne, head of corporate finance advising at Davy's Stockbrokers, thinks shares had acquired a dubious reputation as a get-rich-quick, early retirement scheme, not just for employees, but for senior management who got into business only to float the company in an initial public offering and cash out.

"If people join a company only for the shares, then I really don't think they should be in the business," he says.

"They have to understand they have to work for their reward."