Wall Street has been good indeed to the high-technology establishment this year. The stock prices of companies like Intel, Microsoft and Oracle are up 50 percent or more, and even stodgy old I.B.M. has seen its shares bid up nearly 40 percent.
But on the other side of the investment world's digital divide languish the once-glamorous companies mining for riches on the Internet, trying everything from on-line commerce to new media. The very names of the some of the young companies, like Yahoo Inc. and Excite Inc., speak of optimism and enthusiasm -- a sentiment shared by many investors earlier this year, but no longer.
Wired Ventures Inc., a champion of Internet culture and commerce in its monthly magazine, was forced to shelve its initial public offering last week. It cited ''adverse market conditions'' -- which is to say investors were unwilling to pay anywhere near the asking price, which would have valued the company at $272 million, for Wired magazine, an Internet media service called Hotwired, a book division and plans for a television program. The magazine, by all accounts, is a success. But the prospects for the other ventures are less certain, and all of them have proved costly. Wired Ventures lost roughly $30 million in the second quarter of this year.
Wall Street's frosty treatment of the Wired offering comes as no surprise to many of the companies that are written about in Wired magazine. The roll call of companies whose stock prices are well below the levels of earlier this year span a range of Internet-related businesses. They include the Internet search engines and directories (Yahoo, Excite, the Infoseek Corporation, Lycos Inc.), electronic commerce (Cybercash Inc.), Internet telephony (Vocaltec Ltd.), Internet service suppliers (Netcom, Psinet Inc.), Internet information services (Individual Inc., Infonautics Inc.) and on-line services making the transition onto the Internet (America Online Inc., the Compuserve Corporation).
Even the Netscape Communications Corporation, the Internet software leader, has seen its stock price drop by one-third this year. Investors are concerned about the two-year-old company's ability to withstand an increasingly strong challenge from the Microsoft Corporation as it attacks Netscape's business in software for browsing the Internet and programs to build private networks called intranets.
Digital Video Investments, a New York research firm catering to institutional investors, tracks 48 Internet software, service and new media companies. Its stock index is down 46 percent this year, a performance that is a world apart from the experience of technology bellwethers like Microsoft.
Earlier this year, said David Simons, managing director of Digital Video Investments, investors were looking for the next Microsoft, a promising high-technology concern whose share price was ready to take off. ''It turned out that from an investment standpoint, Microsoft was the next Microsoft,'' Mr. Simons said.
Technology stocks as a whole have not done nearly as well as the sector leaders like the Microsoft Corporation and the Intel Corporation, but they have managed a respectable climb. The Hambrecht & Quist index of 250 technology stocks, for example, has gained 12 percent this year. A more comprehensive index, tracking 1,500 information technology companies and compiled by Broadview Associates, an investment bank in Fort Lee, N.J., is up 8 percent.
Why have so many Internet companies been abandoned by investors in the current bull market? ''Investors have become more realistic about how long it will take for many of the Internet companies to show any profit and more enthusiastic about the continuing growth prospects for established technology companies,'' said Richard Shaffer, a principal of Technologic Partners, the technology research firm in New York.
No one seemed too concerned about profits when many of the new Internet companies made their initial public stock offerings late last year and this year. In the ultra-fast world of Internet competition, the traditional rules for taking a company public were said to no longer apply. The old logic of building a business gradually, and generating revenues and solid profits before taking a company public, was replaced by a new theory that building market share quickly was the main goal.
The Internet business, executives said, is a perpetual sprint. Earnings will come later, they said, but slowing down to try to make a profit anytime soon would be a mistake. So companies went public before becoming profitable to raise capital to invest in gaining market share.
''Everybody went public early,'' Joseph Kraus, a founder and senior vice president of Excite, explained a few months ago. ''This is a land grab, and for the winners the payoff should be huge.''
Based in Mountain View, Calif., Excite is an Internet search service that competes with Yahoo, Lycos and Infoseek. In the Internet land rush, they all went public earlier this year, and their stock prices are all well below their highs. Excite, which went public in early April at $17, jumped to a high of $21.25 on its first day of trading. Since then, it has retreated, closing on Friday at $7 a share.
''These are companies that still have to prove they have a real business model,'' said Roger McNamee, general partner of Integral Capital Partners, an investment firm in Menlo Park, Calif. ''If they don't prove it, their stocks are overvalued even at today's lower levels.''
The land rush analogy is an apt one for the scramble to grab markets in the Internet, said Charles Federman, managing director of Broadview Associates. But investors, he said, are now more skeptical that some of these markets will ever become lucrative.
''Unfortunately, the land rush seems to have included a lot of swampland,'' Mr. Federman said.
The companies making money on the Internet are mainly the suppliers of the underlying tools and infrastructure. Cisco Systems Inc., for example, makes routers used in building large computer networks. Cisco's stock price is up 59 percent this year. Sun Microsystems Inc. makes the computer work stations used as the hubs, or servers, on computer networks attached to the Internet. Sun's shares have increased about 30 percent.
''It's the Internet plumbing companies that are making money,'' said Mr. Shaffer of Technologic Partners.
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