Mary Redux.(Cover Story)

Byline: Michael Hastings

Mary Meeker made and later unmade her reputation as an analyst with "The Internet Report," a path-breaking 1995 tome that claimed making money in this exciting new sector was like "shooting fish in a barrel." We know how that turned out. But how fares the latest work of the tarnished Morgan Stanley star, which triggered more than a few cases of deja vu when it was released this April under the title "The China Internet Report"? "It smells like the same tactic," says Andy Kessler, a former analyst who wrote a book about Meeker's role in the bubble. "It's a pitch book for Morgan Stanley."

The truth, however, is that Meeker was at least partly right about the Internet itself (see Amazon.com's stock price). And in her new book she profiles companies with real profits, like game-developer Shanda, and proven business models, like the online travel service Ctrip. But critics say that she is late to the China game and again--her caveats notwithstanding--effectively recommending stocks after unsustainable growth. The stock prices of the three major players highlighted by Meeker--Sina, Sohu and Netease.com--had seen triple-digit increases, but have dropped 30 percent or more since her report appeared. Expectations for 2004 revenue growth are falling sharply, too.

So what happens next? One view is that China Internet shares may be starting to settle at a rational price level, but "may be" are the operative words. "These valuations aren't nuts," says Mark Headley, manager of the $2.6 billion ...