Still, there are plenty of opportunities for investors. Chief among them is VeriSign Inc. (VRSN), which owns about 75% of the market for Web-site encryption services. With its stock down 78% from its peak, to around $56, and the company generating $46 million in profits last quarter before merger-related charges, some analysts feel it's a good time to buy. Another solid citizen: Exult Inc. (EXLT), which provides human-resources applications, managing everything from payroll to benefits. The upstart recently inked a 10-year deal with Bank of America (BAC), helping push its stock to $12--some 18% above its June IPO. "We like ASPs that handle one business better than anyone else," says Merrill Lynch & Co. analyst Bob Stimson.
Some of the biggest potential winners haven't gone public yet. A handful of the newest ASPs are automating software deployment and better integrating applications that weren't built to work together. Upstarts Jamcracker, Agilera Inc., and Loudcloud are developing "smart" online software. "Some of the best companies have yet to come," says CIBC World Markets analyst Stephen J. Murphy. Judging by what's already available, that's welcome news. By Ben Elgin in San Mateo, Calif.