Stumbling over Customers

Remember Jim Ryun and Mary Decker? Both were world-class middle-distance runners who made the wrong kind of news in the Olympics, finishing out of the money after stumbling over competitors (Ryun in '72 in Munich, Decker in the '84 Los Angeles games). As the Internet gold rush turns into an endurance race, even the most promising New Economy competitors are struggling to maintain their balance as bodies fall around them.

Too often those spent carcasses belong to customers, and when a big one collapses in your path, it's a tough hurdle to clear. Just ask Loudcloud, which late Friday announced that one of its large customers, the foreign exchange trading portal Atriax, was ceasing operations. Loudcloud suspended its revenue guidance for 2003, and its common stock is paying the price today.

Loudcloud has had one of the highest profiles in the managed hosting arena, from its birth as the brainstorm of Internet pioneer Marc Andreessen right through to its much-ballyhooed IPO, which many see as the last gasp of Wall Street's Net euphoria. After a case of the post-IPO blahs, Loudcloud in recent months had begun to exceed expectations. Now, like Universal Access, that hopeful trajectory is imperiled by a customer bankruptcy.

These companies may still get the gold. But perhaps the endurance race isn't exactly the right analogy.

In my younger and thinner days, I competed at every distance from the 100 meters to the marathon. I was never the fastest or fittest athlete, but found my niche in the 400-meter intermediate hurdles. About 350 meters into the race, most runners experience the phenomenon known as "rig" - short for rigor mortis. Your leg muscles tighten up, your stride shortens, and everything starts to hurt. And there's still one more hurdle to clear.

I liked this part of the race. Being fast and fit was fine for the first half of the race. In the final stretch, the odds tilted in favor of those who could endure the most pain and find a way - any way - to clear that last hurdle.

The current market reminds me of those last 50 meters. The field has thinned, and those that are still upright are stumbling and gasping for breath. The winners will be the those who can stay nimble in a harsh environment, and thrive when the gut-check arrives.