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I talk a lot about the technology industry and the changing trends therein. Some
say Im a visionary, thanks Mom and Dad. That is all well and fine for the
industry but what about you? The biggest impacts of the roaring technology
industry has to be on the stock market. This is where you come in. You too can
benefit, you can invest.
One of my readers came to me asking about a
sidebar I ran which listed the Wall Street Darlings that have captured my heart.
He asked me why I picked them and why are they good investments. We discussed
the attractiveness of "tech stocks" but how can you pick one over the other?
Some companies have ridiculous stock prices and have yet to turn a profit, mind
share is their claim to fame but lack any real value.
I want to first
warn you that I do not know everything and I can not predict the future.
Individual stocks are mention because I would be buying them, not because they
are guaranteed to make you money. Various characteristics of a company that
appeal to me are mentioned only because that is what I look for, not because it
ensures the companys stock price will rise. If you need any more proof that I
know absolutely nothing... read on.
Im sure you can tell that a good
investment is a company that is solid. What that means is that it has to have
something besides a nerdy CEO and a flashy logo. It is all about producing or
building something real. This could be hardware, software, network technology
or something never seen before. Vague as that may be, it will fall in to place
soon enough. I would be touting a flag pole company if I could find one growing
as fast as todays technology companies.
Vaporware
Computer
people have a name for software that is nothing more than promises of grand
features and nothing to back it up, the vaporware becomes too unruly to ever be
possible. That is how I see many of the dotcom companies springing up today.
Most of them are riding the excitement of the Internet and technology in general.
They grow fast and eat through venture capital funds. I feel they sell
themselves as the future of business but I dont think they have a clear vision of
the future. Most of them are only considered successful if they are acquired by
another company. I really get ill when I see vaporware companies acquiring other
vaporware companies. Acquisitions are only as good as the weaker of the two
companies.
Big Blue
An excellent stock is IBM. Their
nickname "Big Blue" eludes to their blue chip nature. IBM is a big company that
has amassed resources and reputation over the years. They are mature but not
stale, and innovative without being cocky. The best part of IBM is the fact that
it has so much power in its name but still devotes so much to producing new
technology. Mainframes will always be their bread and butter, they could still
be very successful just doing that. They still make sure they are on the cutting
edge in software, microprocessors and other semiconductor products. IBM uses
their history to create the future. They teamed up with Apple and Motorola to
develop the PowerPC chip using their high end POWER chip as a roadmap. Now the
PowerPCs are faster than any pentiums. They also keep engineers in mind, their
own as well as those on the outside. The open source trend is not lost on IBM.
They recently started the PowerPC Open Platform project (see 10/12/99 article). The POP project makes the design to motherboards that use the PowerPC
chip freely available. This has created a small explosion in the realm of Linux
servers and embedded chips. Jeff Carr, president of LinucPPC said this is a
great boon to them because engineers can now design their own PowerPC based
computers with more freedom and less cost than buying them from Apple. E-commerce
is a trend that is the reason for so many of those useless IPOs and IBM is now
using their hardware and software savvy to bring businesses to the web.
The internet is bring a flood of business and information all around the world.
Someone has to develop the plumbing. Those someones are Cisco Systems and
Lucent Technologies. They make network hardware, like routers and switches,
things between phones, computers and networks. With hardware that is that
important. the companies need to be focusing on two things, research and
products. They cant simply do research and they cant simply toss products onto a
truck. Lucent was once the hardware and production arm of AT&T and Cisco
invented the router but they do more than remind us of past glory.
Here
it comes... Apple. Apple Computer is one of the greatest technology
companies on the market. Apple sells vision and culture but they also employ
some of the worlds greatest scientists. They do more than say what the future
will be and what it can do, they invent the future. Past glory aside, they are
still developing some premiere technology. Apple invented Quicktime, which is
now the standard in video and image authoring and playback and is soon becoming a
standard in streaming media. Apple also developed Firewire, a high speed
input/output interface that transfers data at 400Mbps. They developed it at a
time when it was too much for a personal computer so they licensed it out to
digital camcorder makers. Now digital camcorders can communicate to each other
with the only interface that can handle high quality video. Now that personal
computers have caught up, Firewire ships on Apple computers so they can
communicate with digital camcorders. Apple has a habit of embracing new
technology to grow with the industry. A year and a half ago, nobody knew what
USB was. USB is another high speed interface that performs at 12mbps. Apple
made it the standard on the iMac in August of 1998 and now USB is everywhere.
The PowerPC chip isnt lost in this column, that is another thing that Apple
embraced. Instead of joining the rest of the world that ran on Intel chips, they
help develop a new chip that outperforms the competition. Apple is now finishing
up Mac OS X, a completely modern operating systems with power, features and
stability that will make Windows look even sadder. OS X melds new technology
like Java and the Internet with time tested technology like Unix.
My
face wouldnt be in an iMac if I wasnt going to mention it. Apple brought magic
back to the consumers with the iMac, the computer aimed toward consumers who want
to get on the internet (nobody knew it could take 15 minutes). I believe the iMac
is the first step toward the Internet Appliance age touted by Oracles' Larry
Ellison as well as the CEOs of Sun Microsystems and Red Hat Software.
I would be a buyer of AAPL and SUNW at any price. RHAT is very new and ORCL is
very quiet, please impress me guys!
Connect me
Service is not a
bad thing. But in the technology world, service is more than running a chat
forum. In technology, service means networks. RCN Corporation is my
favorite network company. RCN is small and scrappy but smart enough to grow at a
fierce rate. RCN is the first company that offered me an alternative to Bell
Atlantic for local phone service. It was then that I found out that they know
the value of a network. RCN is building a networks based on the latest in fiber
optic technology, sparing no expense to ensure the network has room to grow.
Lots of companies build fiber networks but RCN is targeting consumers. They want
to use the fiber optic network to deliver local and long distance phone, high
speed internet and cable television all through one wire. Other companies target
businesses which will return big money in fewer contracts. RCN knows that the
consumer market can be very lucrative. RCN will attract customers by providing
savings when they buy more than one service, which means they have to write fewer
checks. RCN also knows that after so many years of monopoly local phone and
cable companies, consumers are hungry for a choice.
There is a lot that
I can say about AT&T. But the most important thing is that they are adopting
the same strategy as RCN. They are buying cable companies in order to bypass the
Bells copper kingdom and provide multiple high quality services over cable.
CMP's Techweb
Akamai Technologies is a new company that Apple has worked
with (see "The Browser War and the Next Web" from 11/9/99). Akamai, which means "success"
in Hawaiian, has built a high speed network that will connect a companies web
site to users computers faster. Their servers are all over the world on their
private network, and when you access a web site that has been "Akamaized" it will
be loading from a server closest to you, it hits less net traffic and loads
faster. Akamai is doing very well with internet video and web sites with a lot
of images. The company recently started trading publicly and is overvalued (IPO
Euphoria), I would wait but will definitely buy it eventually.
There is
no quick fix to picking stocks. All I can say is to consider the picks above and
examine the reasons I like the stocks. I also encourage you to do your own
research and talk to a professional. A wealth of information can be found at
quote.yahoo.com and www.techweb.com (run by CMP Media a company in Manhasset, NY; I
watched the stock go from 11 to 30 when it was acquired by United News & Media.
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