Forum Archive Index - December 2000

["Ben Dutton" <bendutton@sharechat.co.nz>]

Forum members - sorry about this - please ignore and delete the messages.

I have unsubscribed the person and hopefully we won't get any more messages
like this appearing.

Best Regards

Benjamin Dutton


----- Original Message -----
From: "Terisa Frost" <terisa@stanfordjames.co.nz>
To: <sharechat@sharechat.co.nz>
Sent: Friday, December 01, 2000 8:39 AM
Subject: Re: [sharechat] US Markets/Interesting Article


> Hi there,
>
> Please email this direct to Sheldon sheldon@stanfordjames.co.nz and note
> that anything that comes into my email for it will not be forwarded to
him.
> Thanks.
>
> ----- Original Message -----
> From: Ben Dutton <bendutton@sharechat.co.nz>
> To: <sharechat@sharechat.co.nz>
> Sent: Friday, December 01, 2000 7:20 AM
> Subject: [sharechat] US Markets/Interesting Article
>
>
> > As I write the Nasdaq is down 6% and the Dow is down 2% - it's definitly
> not
> > a good day on the US markets - lets hope that the NZSE can continue to
> > resist (on the whole) following Wall Street's drops...
> >
> > This article showed up in my inbox this morning from the ever reliable
Red
> > Herring magazine - check it out - it certainly makes for an interesting
> > read.
> >
> > Best Regards
> >
> > Benjamin Dutton
> >
> >
> > PERSONAL CAPITAL: PERSONAL CAPITAL: Capital at risk
> >
> > It's not a pleasant time in the market... or is it?
> >
> > If you're looking to turn a quick buck as a day-trader, it's
> > a terrible time in the market (unless you're adept at
> > selling stocks short). But for a real, long-term technology
> > investor, things are getting interesting.
> >
> > Remember back in the early 1990s, when not every investor
> > was a technology investor? Back then you could pick up Cisco
> > Systems (Nasdaq: CSCO) with a price-to-earnings ratio of 30.
> > Well, it would be nice to see such values again -- and the
> > more the bubble deflates, the closer we get.
> >
> > This year's massive, painful, and volatile correction in
> > many young technology companies is a by-product of Wall
> > Street's rush to take companies public. The massive assembly
> > line of IPOs churned out over the last two years flooded the
> > market with young, inexperienced, and unprofitable
> > companies, and a lot of inexperienced investors gobbled them
> > up. Many of these companies were completely incompetent or
> > had terrible business models. Others were simply not ready
> > for the public markets.
> >
> > This column was started on the premise that the market was
> > turning into a risky public venture market. That type of
> > environment demands a closer, more analytical look at
> > specific vertical technology fields. As clumps of technology
> > companies in specific markets go public earlier in their
> > life cycle, investing gets more risky, but the potential for
> > huge returns is also still there.
> >
> > THE PUBLIC VC MARKET
> > Years ago, an emerging market would have dozens of players
> > funded by the venture community. These companies would fight
> > tooth and nail for market share and profitability -- in the
> > private market. Then, after several years of creative
> > destruction in the market, Wall Street would consider taking
> > them public.
> >
> > In the last two years, we saw an elimination of the later
> > stages of the IPO process. Wall Street stripped out the
> > requirement for profitability -- or in many cases, even the
> > requirement for revenue -- and took the companies straight
> > to the market. You had dozens of companies going public in
> > the same market, with no prior weeding out in the private
> > market.
> >
> > In my mind, this all culminated in July of this year, when
> > Corvis (Nasdaq: CORV), a promising optical networking
> > technology company founded by former Ciena (Nasdaq: CIEN)
> > founder David Huber, went public without any revenues and
> > certainly no promises of profit on the near horizon. The IPO
> > was really a $1 billion venture capital round, funded out of
> > the wallets of public investors, at a valuation that would
> > make any real venture capitalist cringe. Wall Street quickly
> > bid Corvis up to a $37 billion market cap within a week.
> >
> > Corvis's market cap is now $9 billion, as the stock has
> > fallen more than 75 percent in just four months. This IPO,
> > more than any others, is a symbol of the extremes tested by
> > Wall Street. After the recent correction, the market has
> > become more selective. Will we return to only taking
> > profitable companies public? Probably not. But reckless and
> > greedy IPOs with irrational valuations have been put on
> > hold.
> >
> > In the venture market, risky and turbulent company life
> > cycles are the norm -- a company, as it evolves, goes
> > through fits and starts, customer wins and losses, and an
> > evolution in management and culture. If the companies blow
> > up, or need help, the VCs and other investors become
> > involved. But such investors are accustomed to large amounts
> > of risk, and they build portfolios that are hedged against
> > such risk with a "one in ten" philosophy of funding enough
> > companies to hit at least one grand slam out of every ten
> > investments. The average investor cannot afford to assume
> > that much risk.
> >
> > ------------------------------------------------------------
> >                A D V E R T I S E M E N T
> >
> > >From the hottest IPO to the latest market trends, you won't
> > find more extensive business and financial news on the web
> > than by signing up for Individual.com, the personalized FREE
> > service that lets YOU choose what's news.
> > Register at Individual.com now!
> >
> >
>
http://ad.doubleclick.net/clk;2005797;4971958;y?http://www.individual.com/re
> > gistration?mc=%m&plcmt=DC-%esid!-%epid!&adcode=%eaid!
> >
> >               A D V E R T I S E M E N T
> > ------------------------------------------------------------
> >
> > WHAT NOW?
> > In the first leg of the correction in April, we adjusted our
> > attitude toward this new wild-west public market with the
> > new new rules. One of the rules was that an unprofitable
> > company (and certainly one without revenues) should never be
> > valued over $10 billion. Another was that if an investor is
> > not able to diversify the portfolio and play several
> > companies in the same technology spaces, you're better off
> > sticking with bonds or mutual funds.
> >
> > What you have seen in the market this year is the negative
> > aspect of that risk -- young, fast-growing but inexperienced
> > companies can collapse back to earth just as fast as they
> > sailed into orbit -- all it takes is one sticky quarter.
> > Take Cacheflow (Nasdaq: CFLO), one of the companies I've
> > written about, as a recent example. Its quarter was deemed a
> > disappointment. A rocket ship up, and a lead balloon down.
> > Surprising? Not really. Painful? Sometimes. But necessary
> > for the evolution of emerging markets. The company still has
> > the same potential, but Wall Street's hacked it down for its
> > short-term bobble.
> >
> > So, what now? Largely, what we are seeing now is an across-
> > the-board valuation reality check. When Wall Street gets
> > gloomy, it dwells on risk and becomes increasingly
> > pessimistic. Remember that the market is very shortsighted.
> > You should keep your eye on a two- to three-year time frame.
> >
> > Can the Nasdaq go to 2000? Possibly. Will it go to zero?
> > Definitely not. The market should begin the healing process
> > by the first quarter of next year. Of course, it would help
> > the process along if the country avoided a civil war and
> > picked a new president. And history says that the
> > probability of the Nasdaq rising to new highs within the
> > next five years is extremely high, barring a complete
> > collapse of the U.S. economy.
> >
> > FOLLOW THE LEADER
> > Many of the companies closely followed by Personal Capital
> > were picked because they were emerging as leaders in
> > developing technology markets, and they were also leading
> > hot trends. For example, BEA Systems (Nasdaq: BEAS) was
> > gaining momentum in the componentized Web application space.
> > Companies such as Extreme Networks (Nasdaq: EXTR), Sycamore
> > Networks (Nasdaq: SCMR), Ciena, Juniper Networks (Nasdaq:
> > JNPR), and Redback Networks (Nasdaq: RBAK) are leading the
> > charge in next-generation networking gear.
> >
> > JDS Uniphase (Nasdaq: JDSU) and SDL (Nasdaq: SDLI) are
> > gorillas in the optic components space, and their valuations
> > are finally reaching attractive proportions. Micromuse
> > (Nasdaq: MUSE) maintains its lead in the field of
> > telecommunications network management.
> >
> > Another sector to watch is communications chip makers. Many
> > of these companies, such as Xilinx (Nasdaq: XLNX) and
> > Broadcom (Nasdaq: BRCM), were the first to get slaughtered
> > in the correction, and they are thus likely to be the first
> > to recover. Xilinx, which has seen its profits grow at a
> > rate in excess of 80 percent and is now trading at a P/E
> > ratio of 21, looks downright cheap.
> >
> > With the IPO pipeline shutting down, these companies I
> > mentioned, most of which are already profitable, will get
> > stronger as the upstarts will need more time to raise
> > capital and catch up. That's why we should now get back to
> > the basics of technology investing, and look for the
> > profitable leaders in the public space to extend their
> > leads.
> >
> > RECENT LIGHT READING NEWS STORIES
> >
> > * Patent points to Corvis secrets
> >   http://www.lightreading.com/document.asp?doc_id=1586
> >
> > * Cyras: what, us worry?
> >   http://www.lightreading.com/document.asp?doc_id=1616
> >
> > * Ciena spooks the market
> >   http://www.lightreading.com/document.asp?doc_id=1603
> >
> >
> > - R. Scott Raynovich
> >   rayno@lightreading.com
> >
> > * R. Scott Raynovich, former investment editor of
> > Redherring.com, is executive editor of Light Reading
> > (http://www.lightreading.com), a global site for optical
> > networking. He has covered technology markets for more than
> > seven years. *
> >
> > ------------------------------------------------------------
> >
> > RELATED LINKS
> > * Personal Capital: The new new rules.
> >   http://www.redherring.com/investor/2000/0406/inv-pc040600.html
> >
> > * What's Corvis's secret?
> > http://www.redherring.com/investor/2000/0810/inv-pc081000.html
> >
> > * Fish or Cut Bait: Fiber-optic frenzy.
> >   http://www.redherring.com/investor/2000/0731/inv-focb073100.html
> >
> > * Previous Personal Capital: Get ready for broadband.
> >   http://www.redherring.com/investor/2000/1116/inv-pc111600.html
> >
> > ------------------------------------------------------------
> >
> > Discuss today's column in the Personal Capital column discussion:
> > http://boards.redherring.com/WebX?13@^2342@.ee6c58e
> >
> > or check out forums, video, and events at the Discussions
> > home page:
> > http://www.redherring.com/discussions/
> >
> > ------------------------------------------------------------
> >
> > FREE email newsletters from Redherring.com!
> >
> > Want insight into the hot IPO market, long-term investing
> > strategies, future technologies, stocks to watch, venture
> > capital funding, and more? Get FREE email newsletters in
> > your inbox from Redherring.com, with the insight, analysis,
> > and opinion to help you make more strategic business and
> > personal investing decisions. Subscribe today.
> >
> >
>
http://www.redherring.com/jump/om/i/business/rhcom/global/subscribe/47.html
> >
> > ------------------------------------------------------------
> >
> > SPECIAL OFFER on RED HERRING magazine!
> >
> > Stay on the cutting edge of technology -- subscribe to Red
> > Herring. By taking advantage of this special offer, you'll
> > pay only $39 for a total of 24 issues and SAVE 67 percent
> > off the cover price! New subscribers only, please.
> >
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> >
> > ------------------------------------------------------------
> >
> >
> >
>
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