The once hot 'new economy' stocks hit skid row as their promise seems to sour while real profits are now coming from the old brick and mortar companies.

Shares of another iconic American company took a beating last week when Apple warned Wall Street on August 3, this year, that its earnings figures over the past four years "should not be relied upon." With the announcement, Apple and its, equally iconic, figurehead, Steve Jobs, slipped deeper into trouble. Also, last week, tumbling to their lowest since 2001, were the shares of Dell, the world's biggest maker of PCs, after it issued a warning that profits would not meet expectations.

Apple and Dell, each in their own way, have been the bright kids on the technology block. If the iPod is only a recent example of Apple's trailblazing innovative ways, then in a globalised market Dell has always been the company that no one could beat.

The woes of the technology sector are not confined to these two iconic companies alone. Dell's profit warning followed an announcement earlier in the week by Intel that revenues would not meet its forecasts for the year. Shares of its rival, AMD, also closed almost 16 per cent down, even as it reported low Q2 sales for the year, thanks mainly to its chip price war with Intel and a falling demand for PCs.

Elsewhere in the sector, the news for the technology companies stayed grim as Yahoo! lost further ground to Google and Microsoft continued to give the impression of a lumbering giant, struggling with delayed product launches and leadership transition issues.

As growth begins to slow, in the face of cutthroat price competition for a larger market share, the troubles of new economy companies now stand in striking contrast to resurgent old economy companies.

Last week, even as Dell shares took a tumble, heavy machinery maker Caterpillar, the world's biggest maker of earth-moving equipment and also the traditional bellwether for the US's old economy sector, announced that it was on course to record its highest annual profits and revenues in 40 years. For some participants of an old debate, which had gripped the business world in the 1990s, Caterpillar's resounding comeback is a historical vindication of sorts.

The 1990s debate discussed the virtues of the new economy as opposed to the old economy. The debate posited new economy companies as representing a change of guard that would transform society with their emphasis on fresh technologies, products and services. In no small measure, the debate sparked off the boom in technology stocks in 1995. Companies like Intel, Microsoft and Cisco were suddenly the hottest properties in the world, even as Caterpillar, General Electric and transportation giant CSX, dubbed old economy dinosaurs, became yesterday's story.

Given the recent downturn in the fortune of new economy companies, and the resurgence of old economy ones, analysts are now finding reasons to revisit this debate. The most striking transformation, perhaps, has taken place in resource stocks, condemned as old economy has-beens just five years back.

With a market capitalization of $402 billion Exxon Mobil Corp, the world's No 1 crude oil major, is now the top-weighted company among the 30 stocks in the bellwether Dow Jones Industrial Average, overhauling the likes of General Electric and Microsoft. Heavily diversified ore and metal producer BHP Billiton, along with mining giants Rio Tinto and Anglo American, is another heavyweight on the bourses, with a market value of $128 billion. Very colourful perhaps, but understandable, if one analyst should refer to these companies as the new 'masters of the universe.'

Jim Collins, co-author of the 90's classic, Built to Last: Successful habits of visionary companies, an analytic study of the underlying principles that could yield enduring, great companies, had dealt with certain issues attending the rise of the new economy companies in a masterly article Built to Flip six years back.

In the article, Collins says that the success of Built to Last, at the time, was a great surprise to him, given that the companies that they had analysed, such as Disney, General Electric, HP, IBM and Wal-Mart, big names today, weren't hot companies then.

Looking for the likely reasons for its success, Collins says that Built to Last gave people three perspectives that they desperately craved. First, that there are some timeless fundamentals, which always applied. Second, that the essence of greatness did not lie in cost cutting, restructuring or the pure profit motive, but rather in people's dedication to building companies around a sense of purpose, around core values that went beyond just making money. Third, that readers were inspired by the notion of building something bigger, and more worthy, of lasting than themselves.

In less than a year of Built to Last becoming a success, the Internet boom was in full flow and flip was in. Back to Collins: "Companies with no significant products, profits, or prospects scrambled to position themselves in the "Internet space." The point of this new game was impermanence: Start-ups flip their stock to underwriters, who flip the stock to individual buyers, who flip the stock to other individual buyers - with everyone looking for a quick, huge financial gain."

Referring to it as the Silicon Valley paradigm, Collins described the way people went about handling a start-up: "Develop a good idea, raise venture capital, grow rapidly, and then go public or sell out - but, above all, do it fast."

Fuelling the built-to-flip model, Collins points out, was the unprecedented rise in venture-capital investment. For the venture capitalist, "It doesn't matter whether the idea is a good one - whether the idea can be built into a profitable business, or a sustainable organization, or indeed a great company. All that matters is that the idea be flippable: Get in, get out, and get on to the next idea before the bubble bursts."

Ripping into the degenerate tendencies of the new economy companies, as he then perceived it, Collins was being remarkably prescient in 2000 when he wrote, "The hard truth is that we're dangerously close to killing the soul of the new economy…Even worse, we're in danger of becoming the very thing that we defined ourselves in opposition to. Those who kindled the spirit of the new economy rejected the notion of working just for money; today, we seem to think that it's fine to work just for money - as long as it's a lot of money."

So, for some people the August 3 media reports, describing Apple's troubles, would only have been a case of the chickens coming home to roost. According to an August 4, Guardian Business report: "…Apple is the biggest name out of 80 mainly Californian companies caught up in a furore over the way executives were rewarded at the height of the technology boom at the beginning of the decade.

Last month, the company said it was looking into grants made to executives including its founder, Steve Jobs….Remuneration in Silicon Valley has been under the microscope since an Iowa academic, Erik Lie, published research suggesting that companies had been using unorthodox tactics to boost rewards. Options are generally granted to reward executives for a future rise in a company's share price. But the Securities and Exchange Commission is examining whether companies backdated the price of options to a historic low point, effectively enriching executives from day one...

Two weeks ago, the SEC filed criminal charges against executives at one firm, Brocade Technologies, for backdating…"

In a prescient observation, Collins stated in his article then, "At no time in history has it been easier to reallocate capital without creating lasting value. Of course, in doing so, we run the risk of missing the best opportunity in decades to create something great."