The Dot-Com Bubble: 10 Years Already?

The dot com era ushered in many successful companies that are today household names: eBay, Amazon, WebMD. But others, such as eToys and Pets.com, weren't as lucky. What conspired against them was not simply poor management and a lack of a solid business foundation, but the over-valuation of their stocks, which initially allowed companies to soar, but also caused them, ultimately, to crash.

The Race To Be 'E'

The dot com bubble, ironically, really began before the Internet was a household word. Companies -- sometimes with business plans scrawled on napkins, as the fabled tales go -- popped up online overnight. Traditional businesses, referred to as "brick and mortars" were caught playing catch up. The desire to invest in these dynamic new firms grew too quickly; investors were buying stocks based on their speculating the shares would continue to increase in value, rather than on the premise that the stock was undervalued.

The Party Peaks

On March 10, the Nasdaq Composite Index reached an all-time high of 5,048.62 -- more than double of what the index had been a year earlier. Traders were in heaven, having no way of realizing that a tremendous sell off was to follow.



By March 15, the Nasdaq tumbled to 4,580.

The Snowball Effect

By April 1, many dot-com companies were releasing disappointing annual reports. Those results pushed their stocks -- over-valued in the first place -- down further. The dismal reports cast a pall over the entire tech sector. Compounding the situation, a federal court had ruled against Microsoft in the case brought by the Department of Justice, and the judge had recommended the software giant be split in half. The atmosphere, which had been rollicking only weeks before, was turning gloomy.

The End of an Era

On April 14, the Nasdaq hit bottom. That day, the Nasdaq closed at 3321, a total loss of more than 35 percent since the high of 5133, little more than a month earlier.