(FORTUNE Magazine) – FORTUNE writers and editors talked to some leading technology-industry players about the recent downturn in the market: Does this signal a long-term decline? we asked. Will the industry rebound? Are there signs at your company, or in your industry, that suggest tech is headed one way or the other? And how did things ever get so rough? We expected radiant optimism from people who are typically boosters. Instead we got a wide range of opinion. Here's what some of the top minds in the business have to say.

ANDY GROVE, 64, is chairman of Intel.

I don't have the ambition to become a stock market predictor. But I have two thoughts on this. One is that in the aggregate, most stocks are back to where they were in January, after years of steep growth in terms of revenues and valuation. So the question that needs to be asked (and I don't have the answer) is this: Was January the right number? Or was October the right number, in terms of P/E ratio, valuation, whatever measure you're going to use? Or was July-August-September? One view is, "Oh, my God, what a horrendous fall this is." The other view is that all we gave up was a bubble.

My second observation is that business conditions have not changed much. It's the mood of investors that has changed, and their mood makes a huge difference if you're missing expectations by a penny, or if your growth is merely 90% a year vs. 120% a year. They magnify the differences and punish stocks that don't meet the upper expectations. Investors are in a manic-depressive state of mind. In the manic mood, no matter what the analysts write and no matter what the companies do, every glass is seen as half full, and in the depressive mood those same things are seen as a glass half empty. At the same time we're being aggregated as an industry into something more monolithic than we really are. Suddenly people say, "High tech is in trouble." That's like saying, "Manufacturing is in trouble," and that everything from Oreo cookies to numerically controlled machine tools is in trouble because they are all manufactured.

The high-tech industry is humongous. Inside the different sectors some companies gain and some companies lose. One would think that investment analysis would look at not only sector fundamentals but company fundamentals. Instead, investors are overly concerned with whether the Nasdaq is up today or down today. And when it's down, all companies that are remotely associated with the Nasdaq--whether they are on it or on the New York Stock Exchange--get punished.

I don't understand why this happens. For dot-com stocks, the float was so small that their prices could gyrate just because of day traders. But that shouldn't be the case for Intels and Microsofts and Lucents and IBMs and Yahoos and AOLs. Yet we all more or less rise or fall together. This really is like a panic. It is not the first manic-depressive period I have ever seen, but it is the biggest. The mid-'80s was almost as bad, but back then high tech wasn't that central to the economy.

For those of us doing our business day in and day out, the fundamentals are there, the business hasn't changed, and the significance of the business in the big economic scheme of things is absolutely taken for granted. You know how we have said that sometime in the future, all companies will become Internet companies? Well, the future is here. I just came from a big meeting with our board of advisors. These are big customers--not dot-coms but established brick-and-mortar companies that all have very different, sophisticated approaches to using Internet computing to modernize their businesses. And it's proceeding faster and deeper and more substantially and strategically than any of us would have anticipated a year or two ago.

For now, then, I'm philosophical about the market swings. Nowhere does it say that a normal P/E will be 100. P/E ratios of 100 are not a God-given parameter of any industry. But if you really think about it, what other part of the economy would you want to be invested in? Over any period of time, this high-tech megasector has rewarded investors pretty well. The fundamentals favor it. --interviewed by Brent Schlender

BILL JOY, 46, is Chief Scientist of Sun Microsystems.

We've definitely had a situation where the valuations were completely out of whack with the real potential of some of these tech companies. In some cases we had companies that didn't even have any business model, and people thought they would grow without a hiccup and never have any competition. The real question is to look at these things and ask if they ever will make money. This whole phenomenon is based on the notion that "if we build it, they will come." There's been a suspension of disbelief.

I was a venture investor and am now a shareholder in Juniper, an optical networking company. But even though Juniper's a little company with a couple hundred million dollars of sales, its market cap is greater than Lucent's. Now, I'll admit Lucent has problems, and the truth is Juniper really might take over the market for switching. But then again, maybe there will be competition. Or maybe something else will come along and Juniper's technology won't be the last word. People are pricing these stocks assuming that the companies will grow 100% annually compounded for some incredible number of years. We may have hell to pay when these companies can't meet these expectations and we can't raise capital. I sold most of my other optical networking stocks, because even though I think they're great companies, with valuations at 600 times forward P/E, the only way they'll be fine is if they all turn out to be the next Cisco. Realistically, how many half-trillion-dollar market-cap companies are we going to have?

Granted, there's an enormous amount of capital around for good ideas. But there's an enormous amount of capital for bad ideas too. Having too much money floating around isn't necessarily such a good thing. In the consumer economy it would cause inflation. In fact, I think there is a form of inflation rampant in the high-tech community. Inflated expectations, inflated stock prices, inflated demand for employees. A return to reality and a better filtering of ideas would be very healthy. It used to be that your P/E would just about match your growth rate, but these P/Es of over 100 are astonishing. Should the average P/E of Nasdaq be 45? I have trouble believing that. I know Sun's P/E is high, and our growth rate is high, and we're very profitable. But I see companies with almost infinite P/Es and capitalizations that make me worry.

Basically, we're still in the grip of a buying panic. Historically we never had upside panics; we only had downside panics where everybody sold. But now everybody's just afraid of missing out. We're still discovering the herd behavior of chat rooms, and people haven't been burned enough to know they shouldn't do this. A lot of expensive lessons and street wisdom needs to be developed before people will stop indiscriminately chasing the next hot thing.

But you know, the market always overcompensates on the downside too, so it's pretty impossible to call the bottom. Look at the number of stocks that are down 90%. Historically, you didn't used to have that in such a short time, because people used more rational metrics.

That's why my investments are mostly in cash now. I started selling most of my shares in March. Then, after the dot-com crash last spring, I realized I still had more, so I had my broker transfer all the remaining stocks that weren't being managed into my account, and then I went to Yahoo and typed in all the symbols. Anything with a P/E of over 100 or that was losing money I sold then and there. I was completely indiscriminate. I didn't care what the prices were. I just sold them.

My managed accounts fared even worse. I had one money manager who's down 90% since January and another who's down 80%. It's not fun to be down 90%. So it's not as if I'm sitting on some mountain and escaped all this. I've felt the hurt too. There must be a lot of such stories. --Brent Schlender

JOHN DOERR, 49, is a Partner at Palo Alto Venture Capital Firm Kleiner Perkins. He has helped fund such companies as Compaq, Sun, Netscape, and Amazon.com.

I don't feel the least bit disheartened. I think we're now quite early in the building of the Evernet, this always-on, high-speed, broadband, ubiquitous, multiformat Web. There are really six Webs, and only one of them is deployed now--that's the PC Web. And last I checked there were only about 180 million users of it out of six billion people on the planet. Then there's the voice Web, and I mean literally voice, as in TellMe. There's the hand Web for handheld devices like Handspring or Palm. There's this broadband Web, where by the end of the year seven million U.S. homes will be getting ten megabits of two-way Internet access for $30 or $40 a month. There's also the video Web, which you can see in the video servers from TiVo, Replay, and Geocast. And finally there's the eWeb, which is machine-to-machine communication. So I think there will be just as much innovation in the next ten years as there has been over the past few. There just may not be as many pet food companies.

The thing is that the new economy hasn't been repealed. Moore's law is proceeding apace; so is Metcalfe's law. And now we have these fantastic improvements in bandwidth because of photonics. And Napster, while not yet proven to be a commercially viable business proposition, sure got more users faster than any other company. Look, most of the world is living on a dollar a day of real income and isn't connected to the Internet, so you don't have to take a very long view to say there are enormous markets where innovation can apply.

And I think the death of B2C is wrong. It's been overdone. Of course there will be consolidation--we don't need a dozen pet food or jewelry companies. Lots of companies had no compelling value proposition; they just got their hands on a URL and figured that made a business. But some ideas are going to be real businesses. Homestore is getting an incredible lead in the housing and real estate industry. Blue Nile's going to have a fabulous fourth quarter. Zagat's and Martha Stewart's e-commerce efforts are doing very well. Amazon is going to do very well. These market leaders have a compelling proposition, in the form of unique products or over-the-top customer service.

Then there are lots of upside surprises. Google entered the search business five years after everyone thought it was mature, and now it's doing 50 million searches a day and is within a quarter or two of being profitable. Or take Handspring, which has taken 25% of Palm's market share with more-innovative products. There are other companies that Kleiner has nothing to do with that are doing very well. Ariba just had a great quarter. Yahoo has done a great job growing its business, particularly when maybe a third of their customers are what you would call dot-coms. At Kleiner we're seeing just as many good companies being launched today as we were a year ago.

My real fear is that we'll have all-out war in the Middle East and an oil embargo, and then we'll really see what a tough economy is like. This is just a correction. --Melanie Warner

KANWAL REKHI, 56, is Known as the Godfather of Silicon Valley's Indian Community and was One of the Key Backers of Exodus.

I was very disoriented by the whole dot-com phenomenon. I was never able to figure it out because I couldn't see the value. I had trouble believing that you could sell things on the Internet and have them be cheaper than the store, because of the logistics of one-to-one distribution and shipping. And people talked about Internet time, which to me seemed like no time. How could one create value in hardly any time at all? Capitalism is supposed to be the most efficient use of capital, but money was being put to very inefficient uses. It thought it was all hocus-pocus. But it lasted a lot longer than I thought it would.

I was very disoriented for two or three years. I kept saying, Either I've gone crazy or the world has gone crazy on me. My 21-year-old nephew was talking about becoming a billionaire in no time at all. He was at a Website called eWine.com. And another nephew came out of school and was hired by a startup as a business development VP making $135,000 a year. I said, How can this person who's only 21 be a VP of business development? What business are they developing? That company has since gone under.

The problem was that the dot-com phenomenon was not driven by nerdy engineers like me. It was driven by slick MBAs with a get-rich-quick mindset and new theories. There was no technology advantage or logistics advantage. If I had to choose between a dot-com and an old-line, brick-and-mortar business building a Website, I would back the old-line business anytime. I had lunch with a set of VCs in March, about a week before the crash, and one of them told me that he expected 100% of their companies to pay off. He told me that he considered 100%-a-year returns average. He said, "We expect to sell our losers at ten times our money, and to make 100 times our money on the winners." He was dead serious. He said, "This is the way the world has evolved." I was scratching my head, thinking, How can this be? When I was doing a startup in 1982, making ten times your money in five years was a hit. One or two companies out of ten would be hits; two to three would be so-so; and four to six would fail. I believe we're heading back to that.

I gave a speech in Bombay in January when the stock market was still hot, and I said that 99% of all these dot-coms would fail. A lot have already gone under, but there are still lots more to go. I don't see a business model for most of them. They're all talking now about being ASPs and providing services for other companies, but who will buy this? I even think the jury's still out on Amazon.com. They're surviving by shipping books wrapped in $10 bills, and I don't know how long they can survive doing that. I also have trouble with the valuations of companies like Sycamore and Juniper. How can a company like Juniper be worth $60 billion? Wall Street valuations are still being done by young MBA analysts and fund managers who, when the prices drop, say the value has doubled and it's time to buy. There's a whole generation of people who have never seen a sustained bear market.

I absolutely believe that technology companies can get high valuations, but how high is high enough? There has to be logic. I think we're in a bear market now, and it will last another six months. There are more excesses to be squeezed out. I think that [the Nasdaq] will go down to 2700 or 2800 and stay there for a while. There's maybe one more trip down. --Melanie Warner

HALSEY MINOR, 35, is Chairman and Co-Founder of CNET. He defines his new company, 12 Engineering, as "an operating company whose mission is to reinvent business."

The best time to build a business is when capital is scarce. Like in 1995, when CNET and Yahoo were started. What's happened since then is that the industry has suffered from an overabundance of capital. Too many businesses and too many people trying to do the same thing. When everything looked like a winner, everything started getting funded. Business models started sinking to the lowest common denominator.

If I had started CNET in 1998, what would have happened was that I would have had the most users. Then someone would have started giving away $10,000 a day in a contest, and they would have gotten more users than me. I would have been No. 2 in the category, so I would have started having to give away money. Then, in 2000, investors would have looked at my business plan and said, Geez, no one can make any money giving away $10,000 a day, and they would have cut off capital. We would have died. Instead, CNET is a $580 million company next year, with $145 million in operating income.

But now capital has begun to dry up, and we're going back to an environment like 1995. We're in reset mode, at a place where we can start to rebuild. But it's going to take another year or so for people to regain confidence. I do not think we're going to see 5000 in the next year on the Nasdaq. Companies will have to grow into it. That being said, I actually think we're at the knee of the curve in terms of the real growth and profitability of Internet-driven tech companies. The Aribas of the world--they've been around long enough that some of these Internet technologies are actually starting to be mature tools for solving problems.

So I'm about as bullish as I've ever been. The only difference between now and '95 is that you can actually find lots of employees who have experience using Internet technologies. There's more money than in '95, but not so much that you have to worry about 100 people doing the same thing --Eric Nee

JOHN CHAMBERS, 51, is CEO of Cisco Systems.

We just showed in our latest quarterly results that growth is accelerating at Cisco. Our problems are still managing growth. Yes, the trouble with dot-coms has certainly hurt us, but it has been offset by increases by our enterprise customers. Also, geographically, when one piece weakens, other stronger pieces make up for it. As for the Wall Street analysts, well, the mood now is to ignore the nine positive things and focus on the one area of concern. For us that was inventories. We want to reduce our inventory because we want to reduce the cycle time to our customers. That's it.

As for our stock, I think earlier this year, in the spring, it got ahead of itself. We were trading at five times our growth rate. Historically we trade at one to two times our growth rate. Now the stock is off 30% and we're growing just as fast, and we are selling for one times our growth rate. I think the selloff has been healthy to a certain extent, but everyone's been painted with the same brush. Lucent and Nortel trip up, and our stock suffers. Our product mix and customers are different, our business is accelerating, and yet our stock is now down to the low end of our historical range. The market gets it right in the long run, though. That's why we do five-year options with our employees.

We use periods of disruption like this to go after market share. It's very tough to gain market share when everybody's doing great. It's easier when there's a scramble like now. It's not frustrating; the question is, How do you take advantage of it? Voice, data, and video are all moving into one single IP [Internet Protocol] network. That's our business. Right now reminds me of four years ago, when we were bunched together with Bay, Synoptics, Newbridge, and Fore. Twelve to 18 months later we had broken away. That's what we're looking to do now.

The fact that our stock is down is not such a negative. First, it's easier to recruit folks, because there's more upside to the stock. As far as buying companies, well, the prices of our targets' equity have fallen faster and farther than ours. So it's actually easier for Cisco to buy now, and dilution is less for shareholders. Oh, yeah, we are looking. --Andrew Serwer

LISE BUYER Left Her Job as Internet Analyst at CS First Boston in April and Joined Palo Alto Venture Capital Firm Technology Partners.

There's tons of doom and gloom these days in the VC business. The free ride is over, and the game's going to get a lot tougher. I think we'll see people drop out of the business because it's not as fun anymore, or because the returns aren't as rich. It was too easy for too long. Over the past couple of years it didn't matter whether you had experience in the financial markets or as a ski instructor, you could be just a whale of a VC. It was like bobbing for apples in a dry pan.

So this might seem like an unusual time to get into the VC business, but I think there's huge opportunity. This is a market in which I'm comfortable, because suddenly things are being valued based on legitimate prospects and honest-to-goodness fundamentals, which are things people gave me a hard time about when I was an Internet analyst. I was called the Internet Curmudgeon because I was not as wildly enthusiastic as other people, who probably made their clients more money.

I joined Technology Partners because they have a limit of two or three deals per partner per year. You can actually spend time helping to build the companies and increase the odds that they'll survive. If you're doing 15 investments a year and you're not turning them out really quickly, pretty soon you're on 35 boards, and that's absurd.

I'm saying all this, of course, without having any track record yet, but Technology Partners has been around for a long time, and throughout this whole frenzy they didn't change their style. People looked at them and thought, What's wrong with you that you're not raising a $1 billion fund, and what do you mean you're only doing two or three deals per partner per year? They looked incredibly conservative, but now they're looking better every day. Before, entrepreneurs wanted to associate with highflier VCs. Now we find ourselves a more and more popular potential investor. Sticking to your basic concepts may, over the long run, be the right thing to do. --Melanie Warner

MICHAEL DELL, 35, is CEO of Dell Computer.

What we are seeing is dramatic swings to both extremes. Let's not forget that a company like Dell is still growing, in one year, from about $25 billion to $32 billion in revenues, with $3 billion in operating income and about $4 billion in cash flow. While this is not the same rate we grew at when we were $3 billion in size, remember that the absolute growth in one year is about $7 billion! And the profitability is very healthy. That should not seem too bad. Because it is not bad!

I guess some would call it a slowdown, but you should look at the FORTUNE 500 and see how many companies with more than $30 billion in revenues are growing $7 billion or more per year. Our failure this past year was that we actually thought we could grow even faster than this. While there have been and continue to be some excesses in the new economy, there are also very real changes going on in how productivity is created. Again, look at Dell: We have been able to increase our return on invested capital to well over 250%. --Andrew Serwer

BILL GROSS, 42, is CEO of Idealab, which has Spawned 50 Internet Companies. Its public companies include eToys and GoTo.com.

This is a great time to be creating Internet businesses. I think that we're about to see a 25x increase in the number of minutes per day of two-way usage on the Net. We'll see a 5x increase in terms of the numbers of users, both at home and at work. The result will be this surreptitious increase in usage, where people are "on" even when they're not thinking about it. The stuff is on all the time. The thermostat, the decisions you make about your money--these are all being made all during the day. The impact on productivity will be surreptitious. Think of Bluetooth technology, which is a new wireless standard. Put a $5 Bluetooth chip in every machine in your company, and they can all be optimized at all times during the day. With this kind of underlying growth, lots of great businesses can be created.

The Net over the past five years has been all about growth. Now we're about to see the real secret of the Internet, which is margins. The Net is awesome for building high-margin businesses. In the real world, it's hard to build high-margin businesses because of the cost of goods. On the Net you can build 90%, 95%, 99% margin businesses and protect them with network effects, so once it starts succeeding it's harder to knock off. Think of eBay--boy, do I wish I'd thought of that! It just gets stronger as it gets bigger.

We have the Dot.tv business, a high-margin business. We bought the rights to the domain ".tv" from the tiny country of Tuvalu. So we own this big intellectual property that lets us sell domain names at very high margins. The more it gets promoted--and it will get promoted--the more valuable it becomes, the more entrenched. The false premise of the Net, the false premise we believed early on, was that all Net companies would be great companies. It's painfully obvious now that that's not the case. But here's the truth: There are thousands of eBays waiting to be created. --Rick Tetzeli

REGIS MCKENNA, 61, is One of Silicon Valley's Pioneering Marketers, and Helped Turn the likes of Apple and Intel into Household Names.

I started my company 30 years ago, in the middle of a down cycle. About every four to five years since, we've had a down cycle. In a down cycle two things happen. One, it is a great time to invest in startups, simply because startups work off of invested capital rather than market capital. The second thing is, there are tremendous bargains out there.

The same thing happened in the mid-'80s. In the mid-'80s I took a second mortgage on my home and bought a Miro--a very large Miro--and Intel stock. I still have both. Miro died, and the value went up. Intel was reborn, and its value went up.

The peak of every up cycle exceeds the peak of the previous cycle. I'm a long-term investor. The long-term prospects of high tech are strong. You just are not going to be able to survive in business on this planet without it. The application of the network to business productivity on a global basis is just essential. Wal-Mart moves into Europe, and every retail organization in Europe is terrified, because Wal-Mart has such a sophisticated network. Their competitors say, "Gee whiz, we have to increase our information systems knowledge in order to compete with Wal-Mart." Competition drives investment in productivity. That's not going to slow down.

I work with large companies across the United States, in technology and nontechnology, and I don't see them panicking. None are sitting around wringing their hands that this is a downturn. They are driving costs down, being more cautious about investments, and taking a second look at every dollar spent. But I don't see them panicking or saying, "Gee whiz, I think the market is falling apart."

There was a lapse of consciousness that overtook the American investor in the past 2 1/2 years. That lapse created wild expectations among investors, who came to expect a 100% or more appreciation in their stock in a matter of days or hours. I've talked to friends who've given their children $1,000 to invest in the market, and their children would be upset if the stock only grew 5% or 10%. They'd come in and say, "Gee, my friend's is growing at 100%," or 5,000%. In hiring people the same thing was true. People would hang their head, saying, "Gee, my friends in these other businesses are now multi-, multi-millionaires." The world went crazy for 2 1/2 years.

Some sense has come back into the marketplace. Still, we're going to see continued volatility, particularly in the over-the-counter stocks, for a long time. Real-time technologies have created this instant expectation of a quick buck. I don't think that's going to go away. It's going to be extremely difficult for businesses in the future to maintain stable valuations. Very difficult. --Eric Nee

GEORGE ZACHARY, 35, is a Partner at Palo Alto Venture Capital Firm Mohr Davidow.

I actually feel better about the environment for technology companies than I did a year ago. It's like we've hit the third week of March and it's been ultracold, but now everything's starting to thaw. There are two things I've noted in the past three months that make me think this.

One is that I've never seen this many superqualified available to do things. A lot of companies have gone Poof!, and it's been like a pinata of people have popped out, all looking for something interesting to do. Also, I've been seeing some pretty cool new software technologies. When the market popped in March and April, I wasn't seeing anything interesting. Now I think entrepreneurs realize that they have to start building businesses with an unfair technology advantage, as opposed to an unfair advantage in just amassing capital.

I think we're at the bottom. The reason the market's going to go up again is because it's natural for the category that's viewed as The Future to carry more value than what would rationally be its value. People think high tech is what's going to take over, and that element of promise creates a lot of interest and excitement. It's the temple of mutual admiration, where everyone startssaying, "This is a great company"--which leads to an increase in its value. I don't think it will be as extreme as before, because people have learned that the new economy is the same economy that it was before, just with better technology.

This idea that the Internet holds less promise now is silly. We're at the beginning stages of a multidecade buildout of the Internet, which includes the network and the communication infrastructure and all the apps to support it. Until we get the equivalent of networked virtual reality everywhere, not unlike what people saw in Total Recall--3D projected into space and things like that--we've got a long way to go.

On the networking side, there will be lots of new companies that feed the Cisco machine. Cisco needs to buy these networking companies because it needs their gear to meet bandwidth demand. If Cisco's stock wasn't highly valued, acquiring them would be a problem. But Cisco's growth rate has been super-high and will continue that way because the majority of the network hasn't been built out. The quality of the network we're on now? In ten years it will seem a joke. --Melanie Warner

ESTHER DYSON, 49, is Editor-In-Chief of Release 1.0, a groundbreaking tech newsletter published by EDventure Holdings. She is an investor in and sits on the boards of more than 20 companies.

I'm actually pretty cheerful about what's happened. This clears out the underbrush, so the stronger plants can grow faster and more freely. Now we'll see the best companies flourish. They'll have better access to resources--better access to good people--and less clutter around to distract them. I wouldn't call myself exuberant, but I'm feeling positive.

You ask if there's still money to be made in tech. That's like asking, "Is there still money to be made in restaurants?" Well, there's money to be made in gourmet spots, where they don't get so many customers but charge a lot. And there's also money to be made in fast-food chains, where they don't charge much but move a lot of food. There's even money to be made in bars, where they don't charge anything for food, but do charge for drinks. Where there isn't upside is in restaurants that don't charge for food, drinks, or anything. The point is that the prospects depend on how well you implement a reasonably good business model.

The profitable companies from here on out will be the ones with solid business cases. They might not be sexy, but they'll be useful. As examples, I can mention some of the ones I'm invested in. There's Sourceree, which handles logistics visibility. That's a real business. I'm also funding CVOnline, which started out offline as a profitable recruiting agency and is now heavily online--but still operating as a recruiting company, not as a job-advertising Website. Then there's Paymentor, which does what you can call debt collection--or you could be more polite and call it receivables management. These aren't sexy, but they do address real problems.

I hope the big selloff will end by next spring. A lot of these companies should have blown through their cash by then, and they're not going to get new funding so easily. Not everyone will go out of business. Some companies will be acquired. Others will be gently absorbed. However it happens, soon there will be a lot of highly qualified executives entering the job market. And there will be plenty of jobs for them to move into.

That's a good thing. --Eryn Brown

JAKE WINEBAUM, 41, is co-founder of eCompanies, a Santa Monica incubator whose companies include Business.com, where he is CEO.

Expectations, in terms of valuation and time frame, need to be reset pretty dramatically. Everyone was rushing in, expecting businesses to mature very rapidly. Consumer businesses don't do that. Think about AOL, and how long AOL was around before it hit a million subscribers. It takes a long time to build a product and a brand, and to understand the market. It takes a long time for advertisers to fundamentally change their behavior.

If you look at all the media leading up to and including the Internet, you see the very same thing, a rapid consumer adoption curve. If you look at the advertiser adoption curve for broadcast TV, radio, and cable, you see sort of a flat line that climbs steeply after a few years. The Internet didn't happen that way. Advertisers came in quickly not because they had figured out how to make the medium work, but because there was a ton of money. This gold rush caused them to spend far more, far in advance of their ability to truly leverage the medium.

So everyone now says the Internet doesn't work as an advertising medium. It's a completely false read. Advertisers are just now figuring out how to take advantage of what I believe is the most powerful marketing medium ever created. The audience is already there, and over time advertisers will figure out the right way to target and make the medium effective. In the next three to four years it will start to really pick up steam. If you think about the projections of how big the Internet ad market will be, I think they're understated. I don't think the financial markets have a fundamental understanding of the medium, why it is so powerful, and why it has incredible long-term prospects.

The cable industry got off to a rocky start also. I was working at Time magazine in 1984, in the early days of cable, and I was responsible for its direct-response television. I was buying spots on CNN for $50 per two-minute spot in an election year. We generated 1.25 million subscriptions in one quarter using CNN, ESPN, and other early cable. There were no other branded advertisers on the medium at the time. But the consumers were already there. We figured it out early. We bought absolutely as much of it as we possibly could.

That was at the very beginning of the upswing in cable advertising. It took another five years for the broad adoption of cable by advertisers. A ton of early cable networks went out of business. And a whole bunch of new networks were started once it was clear the advertising dollars were there. Same thing's going to happen here with the Internet. A lot of the early ones are not going to make it or are consolidating. There will be a period when very few new ones will be started. And then there will be a period when a lot are started as it becomes obvious to the financial community, investors, and everyone that the model actually works. --Eric Nee

MIKE RUETTGERS, 57, is CEO of EMC.

The strong companies continue to get stronger. Look at the exceptional growth rates of Sun and Cisco, and even ourselves in the storage business. EMC has told people we see an acceleration every quarter this year. It's pretty hard not to be optimistic. Once companies have committed to collect information--and almost everyone knows information is key today--it almost becomes nondiscretionary spending. If you collect stuff today, it has to go someplace, even when you have slowdowns. Part of the reason we have seen a decline in the PC business is that without a compelling reason to upgrade or buy a fourth PC, you get saturated. I don't see saturation in storage.

Remember, we're not just selling in the U.S. Forecasts of worldwide GDP have picked up to 3.6% through 2003. That's big growth. Most of us are global players.

We're seeing great paybacks on technology in terms of productivity. I've talked to companies recently, and they all understand it and are making investments to help them control costs, and also to generate revenue. If there's a downturn in capital investment, my guess is it will be in factories and other heavy equipment, as opposed to technology.

Our view, even last year, was that the bulk of the impact of the Internet would come from large global companies as they moved to the Internet. You didn't have these big companies doing an awful lot with the Internet last year, for two reasons. One, they were stunned by what was going on and didn't know what to do. Then, once they started to figure it out, everyone was tied up with Y2K. Now Y2K is behind us. Companies are taking some of the innovative, useful things the dot-coms were doing and putting them in place. Some of the things the dot-coms were doing weren't sustainable. But dot-coms were new businesses, and the failure rate for new businesses is about 70%. So there shouldn't have been any surprise that you have new businesses that fail. --Eric Nee

BILL SAVOY, 36, runs Paul Allen's investment firm, Vulcan Ventures.

In the past three years, three specific events occurred that caused the Federal Reserve to inject a significant amount of liquidity into the system: the Asian contagion, the bailout of Long Term Capital, and the Y2K scare. In spite of the rhetoric of the Fed, and in spite of the direction of interest rates that they control, the growth of the monetary base exceeded the organic growth of the economy.

Historically, excess liquidity moves toward where it is treated best. At times that has been commodity markets or real estate or high-yield junk bonds. This time those dollars moved to technology-centric equities. In the beginning it was large-cap equities--Sun, Cisco, Microsoft, Intel, Oracle--great companies with real growth, real products being sold, and real profits. As the Internet came to early adolescence, those dollars chased Internet equities.

That carried through until the first week of January 2000, at which point it became evident that the Y2K nightmare was not going to materialize. The Fed then pulled back on the growth of the monetary supply. Look at M1 and M2 figures, and it's clear. So now there's no excess liquidity to chase those equities. Coincidentally, it became clear that the business model of selling a dollar for 95 cents online could not go on forever.

So all of a sudden, Internet companies were running out of money, there was no real business, and there was no continued infusion of liquidity to push the equities. The natural thing happened: The law of supply and demand kicked in, there were more sellers than buyers, and so the inverse of what had happened the previous three years happened through the rest of this year. And I suspect that this will continue to happen for some time.

Another thing that will affect U.S. technology companies is the strong dollar. For big companies like Sun or Microsoft or Intel, half their revenue comes from overseas. Those sales, when you translate back to dollars, have no margin in them. So now you have this cycle of constantly readjusting what our largest signature companies should be worth. Thus the gap between the inflated technology equities and the old-economy companies becomes even more self-evident. Even though the average Nasdaq equity is down 45% this year, the valuation disparity is still enormous.

That's why I don't see how this downward cycle for the valuations of tech companies can be stopped right now. I do agree that technology is the place to be. It will drive us forward for a long time. But that doesn't mean you should buy technology at all costs. Sometimes you have to deal with the hard reality that the business cycle is here to stay, and that you will go from extremely overvalued to extremely undervalued before you get back to fair value. I'm still waiting to get to the extremely undervalued place so that we can again be aggressive investors in technology.

There's another indicator we haven't seen yet. Bubbles always end with debt problems. The real estate bubble ended with debt problems., the junk-bond bubble did the same, so did the Japanese bubble economy in 1990. The last chapter of this cycle will mean serious debt problems for individuals. I wonder how many people are overleveraged, as they've been afraid to sell their thinly traded securities. When you're worth $5 billion on paper, you can borrow a half a billion and feel pretty good about it, but when all of a sudden you wake up and your net worth is $700 million, you don't feel so rich anymore. Credit card and consumer debt are both at an all-time high. And despite the rhetoric, we don't really have a surplus at the federal government. So I'm waiting for debt to get the spotlight. But I suspect you'll have to see equities unwind a little more before you get there.

At Vulcan we saw this occurring in the second half of last year and have done everything we can to prepare. I'm probably more concerned about this than most money managers, and I am definitely more negative than any senior executive I've run into. They all say I'm overly dramatic.

I won't say I'm predicting a "perfect storm," but I am saying the weather outlook isn't too good. So what you ought to do is anchor your vessel in the harbor, get inside under cover, and let the storm blow over, however bad it may be. Why take the risk of being on the water when you absolutely know that there's a storm coming? --Brent Schlender

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