Dot-com Trouble Chills IT Hiring

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March 30, 2000 (9:20 AM EST)

By Tim Wilson,

Once high-flying consumer dot-coms are finding it increasingly difficult to attract IT talent as their financials and stock prices lose altitude.

"When your stock price goes south, there's definitely an impact on your ability to hire and motivate people," said Gordon Jones, chief information officer of software e-tailer Beyond.com (stock: BYND), which in January shifted its focus to business customers from consumers, after posting an $88 million loss for 1999.

Other e-tailers are experiencing similar difficulties, said Jason Mittman of Primus Associates, a recruiting company that specializes in placing IT and e-commerce executives.

"Once a company has done its IPO, it loses some of its pizzazz as far as prospective employees go," Mittman said. "If its stock is not doing well -- and if people don't see the prospects for that stock to come up -- then that company can have a very hard time attracting people."

Several e-tailers, including some of the Internet's earliest, have hit a wall in recent weeks as Wall Street moves its emphasis from the consumer space to the business-to-business track.

As many as 51 Internet-focused companies stand to run out of cash by year's end without some sort of infusion, according to Pegasus Research International. A number of others have seen their stocks drop like rocks over the past year. In all cases, the lack of financial capital is affecting the search for IT talent.

Primus now does about 80 percent of its executive searches for pre-IPO companies -- mostly dot-coms -- a radical shift from its previous focus on bricks-and-mortar companies.

"People come to a recruiter because they can't find the people they need on their own," Mittman said. "Right now in IT, the companies that are having that problem are the dot-coms and the pre-IPO companies."

And as Wall Street falls out of love with business-to-consumer ventures, it will be increasingly difficult for second-tier e-tailers to get the funding they need to hire IT staffs and expand their infrastructures, said Ulric Weil, an analyst at Friedman, Billings, Ramsey & Co., a financial analysis company. Meantime, stock options aren't much of an option.

"If your compensation package is built around stock options and your stock price is stuck at a few dollars a share, you're going to have trouble bringing in new people," Weil said.

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