SAN FRANCISCO (CBS.MW) -- Their stocks are getting crushed in April as tech-warning sirens wail unabated. Should we buy them now?

• In security software, Check Point Software (CHKP: news, chart, profile), at $21, is down 55 percent from its January high.
• In networking, Riverstone (RSTN: news, chart, profile) is down 76 percent to under $5 a share.
• In semiconductor land, Nvidia (NVDA: news, chart, profile), at $41, is down 43 percent.
• In application software, BroadVision (BVSN: news, chart, profile) is down some 60 percent and trades at $1.29.

Then there are those that every so often appear to be on the cusp of breaking out to the upside, like Yahoo (YHOO: news, chart, profile), which reports this Wednesday.

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Hold on.

It's a wasteland out there of tiny companies born in the latter half of the 90s. Once favored with affection, many (not necessarily those aforementioned), suffer from post-pubescent identity crises.

"Product cycles are so short, if companies miss a market, they might not have the resources to catch up. If they're on their proverbial back, they stay there," said Bruce Lupatkin, portfolio manager of North Bay Technology Partners. "When they're broken, they're broken for a reason." Indeed, they're not called orphans for nothing.

To be sure, some companies are purchased for a premium. If you're glued to the stock screen and nimble enough to get in and out quickly, or, if you have enough cash to spread out the risks and hope winners carry the losers, you might make a buck.

The brave

Lupatkin believes he can scrabble through the wasteland and find stocks that will return 100 percent in two years.

America Online, before it became AOL Time Warner (AOL: news, chart, profile), was passed over for many stocks as it inched up in 1996 while the Nasdaq gained 27 percent in that year. Oracle (ORCL: news, chart, profile) peaked at a split-adjusted 69 cents in March 1990 and plunged to 13 cents by October 1990. Oracle was obliterated as its stock collapsed 81 percent during that period while the Nasdaq fell 22 percent to 325 during the same time. (Sound familiar?)

Who would have had the courage to buy AOL or Oracle then? The brave would have yielded a nice return backing these young and seemingly downtrodden companies.

What's more, what works against technology works for it. Innovation is an equalizer. Few people and few companies evolve with the times.

It's not surprising that only one stock has been in the Dow for nearly 100 years: General Electric (GE: news, chart, profile). IBM (IBM: news, chart, profile) made the venerable Dow list in 1932.

As Klaus Schwab, president of the Davos World Economic Forum, observed: "We have moved from a world where the big eat the small to a world where the fast eat the slow." Young companies tend to be quicker on their feet. See Marshall Loeb's Life in the Fast Lane.

Go-go '90s

We shouldn't forget that we just lived through the go-go '90s. The probability of having all the right forces coalesce to create the big-bang bubble is about as low as Pets.com coming back from the dead. (Thank goodness.)

So, for those who are considering going through the rubble, here are 10 reasons why the search for stars in this teenage wasteland could be in vain.

1. After the bubble experience, there are fewer fools. Fewer fools means it will be harder to generate rising stock prices that aren't backed by fundamental reasons, according to Mike Shor, a professor of economics at Owen Graduate School of Management at Vanderbilt University.
2. If the Internet years (1995 to 2000) are similar to the 1980-1984 PC revolution, it's more likely that companies going public after the 2000 crash will be big winners by the end of 2010. Of the 50 largest market capitalized tech IPOs in the last 22 years, 20 went public between 1985 and 1989. Only 9 went public in the early part of that decade, including Compaq Computer (CPQ: news, chart, profile). Newer companies (that aren't public or just recently went public) are better positioned to survive as they're focused on the latest technology and not encumbered with legacy products. They're also better capitalized. (Security software company NetScreen Technologies (NSCN: news, chart, profile), which went public in December 2001, has a $1 billion market cap. It's gaining market share from leader Check Point, according to analysts.)
3. Five percent of tech IPOs born in the past 20 years created 100 percent of the net wealth created, according to Morgan Stanley. That means if you invested in the other 95 percent, it would have been a zero-sum game.
4. Assuming a few home runs produce outsized returns, what kind of returns do we need? Assuming one invested in the whole group, the five percent of the winners would have to deliver a 20-fold return to make up the loss for the other 95 percent.
5. Those returns don't come easy. It took Microsoft (MSFT: news, chart, profile), the best performing tech IPO in the past two decades, more than five years to deliver a 20-fold return from its offering in March 1986. It went public at 15 cents in March 1986 and hit $3 by March 1991. It took AOL(AOL: news, chart, profile), the second best performing tech IPO, three years to deliver a 20-fold return from its IPO.
6. Odds of success are low with this basket approach. "Not only are we assuming that the basket of stocks includes a Microsoft or an AOL, one has to wait three to five years for that type of return," said Prof. Shor, adding: "And we were in a bull market." In other words: what happens if we're in a bear market?
7. Bear-market risk. According to David Tice, who manages the Prudent Bear Fund, the stellar performance by the Dow over the past 104 years was due to three "super bull" markets. The last bull market period lasted between 1982 through 1999. The periods in between were painfully long and far from lucrative. If you invested $1,000 at the peak of 1929, it would have taken 24 years to recoup that value. If you invested $1,000 in 1966, it would have taken 27 years to recoup that value.
8. Seventy-six percent of venture funding invested over the past 27 years occurred in 1999 and 2001, according to a Morgan Stanley report. This suggests that many companies that were funded shouldn't have been. Invariably they drain our mental energy.
9. Consumer staple stocks, like Anheuser-Busch, might be a better place to park money for now. See prior column: Bud's growing faster than tech.
10. Acquisitions aren't always a great exit strategy. Remember when Yahoo (YHOO: news, chart, profile)bought Broadcast.com? If you bought 10 shares of Broadcast.com at a split-adjusted price of $9, you would have spent $90. When Yahoo purchased Broadcast.com shares at 0.71 Yahoo shares for every Broadcast share, you would have received about $525 in the form of seven Yahoo shares. Those seven shares would now be worth about $130.

Of course some acquisitions have worked out fine. My former employer CNN was purchased by Time Warner, which in turn was purchased by AOL. Consider Netscape, which went public at $28 in August 1995. If you purchased 10 shares at $70 for a total of $700, then you would have made $240 after AOL purchased Netscape in March 1999. If you held onto those shares you would be up $197 today. But not every company is purchased by AOL.

Top 20 largest tech IPOs in past 22 years

The information about tech IPOs came from Morgan Stanley.

In order of market cap and including date companies went public. Microsoft (1986), AOL Time Warner (1992), Dell Computer (DELL: news, chart, profile) (1988), Cisco Systems (CSCO: news, chart, profile) (1990), Paychex (PAYX: news, chart, profile) (1983), Maxim Integrated Products (MXIM: news, chart, profile) (1988), Computer Associates (CA: news, chart, profile) (1981), SEI Investments (SEIC: news, chart, profile) (1981), Adobe Systems (ADBE: news, chart, profile) (1986), Veritas Software (VRTS: news, chart, profile) (1993), Linear Technology (LLTC: news, chart, profile) (1986), Altera (ALTR: news, chart, profile) (1988), Solectron (SLR: news, chart, profile) (1989), Electronic Arts (ERTS: news, chart, profile) (1989), Novellus System (NVLS: news, chart, profile) (1988), EMC (EMC: news, chart, profile) (1986), Qualcomm (QCOM: news, chart, profile) (1991), Sun Microsystems (SUNW: news, chart, profile) (1986).

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