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torlm TOM SIEBEL CEO, Siebel Systems “If you can’t generate profits, significant market share and customer satisfaction, you re out of business.” “On the B2B exchange side, I don’t think anyone will survive. They are all gone.” 3 RealTech ConfPSJune01torlm THE CAPITAL MARKETS HAD IT ALL WRONG 020406080100120P e a k M a r k e t C a p C u r r e n t M a r k e t C a pTravelocity Expedia Priceline eBay Amazon $123B Webvan eBay Amazon All Other $ 020406080100120P e a k M a r k e t C a p C u r r e n t M a r k e t C a p020406080100120Peak Market Cap Current Market Cap4 RealTech ConfPSJune01torlm IS THE REVOLUTION OVER? July 28, 1794 5 RealTech ConfPSJune01torlm THE BUMPY RIDE OF ECONOMIC REVOLUTIONS 1860 1890 1895 1925 6 RealTech ConfPSJune01torlm FUNDAMENTAL FORCES ARE AT WORK 120 100 80 40 60 20 0 1770 1780 1775 Index Workers per bushel of manufactured cotton England 177083 Price of the Model T touring car 190820 1910 1915 1920 1985 1990 1995 Price of CPU puting power $/ MIPS 198295 Lower processing costs ... … with increased throughput ... Fiber capacity Time 105 0 104 103 102 … and powerful work economics 0 20 40 60 80 100 0 1 2 3 4 5 6 7 8 9 10 n Value increases as the square of connections Profit Loss Value Cost 0 2v 6v 12v 20v 30v 42v 56v 72v 90v n(n1)v F+0 F+ 2c F+ 3c F+ 4c F+ 5c F+ 6c F+ 7c F+ 8c F+ 9c F+ 10c F+ nc Value, cost Connections Cost increases linearly with connections … lower storage costs ... $/MB Average HD size in PC at retail (GB) Harddrive size (GB) Cost ($/MB) 0 . 0 00 . 2 00 . 4 00 . 6 00 . 8 01 . 0 01995 1996 1997 1998 1999 2023 2023 2023 202302550751007 RealTech ConfPSJune01torlm LONG DISTANCE Wholesale (Network) ? Design/build ? Operations/maintenance ? Resale/interconnection Retail ? Sales/marketing ? Account manage