.TECH GURU REBOOTS By CHRISTOPHER BYRON
August 9, 2004 -- I'VE been doing a lot of home renovations work this summer, and one thing I've learned is that painting over mildew will only hide it for a while. Eventually, the pesky mold will work its way to the surface and be staring you in the face all over again.
It's the same with George Gilder. Say what you will of him, but America's worst stock picker alive simply won't call it quits.
The man who swooned for Global Crossing, WorldCom, Terayon, Winstar and all the other winged monkeys of the Emerald City he called the "telecosm," is back at it, pumping out the bombast and malarkey as if the tech wreck had never happened.
These days we find Gilder preparing for his eighth annual attention-grabber, known as the "Gilder/Forbes Telecosm Conference," which he hosts in collaboration with media world mini-mogul Steve Forbes.
The jabberfest, scheduled for October in Lake Tahoe, still attracts the same mixture of venture capitalists and money-starved businessmen that helped the tech bubble of the 1990s swell to such Botero-like proportions before popping four years ago.
We'll take a closer look at this conference in a minute, and in particular at the showcase it is providing to one of the companies on the confab's list of speakers: Cenuco Corp. of Boca Raton, Fla., which trades on the Amex and is proving itself a nimble player indeed in the back-scratching game of self-promotion on America's Street of Dreams.
But before getting into any of that, first a quick refresher course on the irrepressible Mr. Gilder, whose boundless capacity for seeming to say important things about the promise of technology mesmerized the stupid and the greedy alike for much of the bull market 1990s.
A one-time speechwriter for Ronald Reagan, Gilder tasted fame of his own at the start of the 1980s when he wrote a book entitled "Wealth and Poverty," which attacked the welfare state through the lens of so-called Supply Side economics, and quickly became a best-selling bible of sorts for Reaganaut conservatives.
It was the booming stock market and Gilder's early fascination with computers that made him a superstar on Wall Street, where his knack for reducing complex topics to user-friendly sound bites (a skill developed as a Reagan speechwriter) allowed him to sound both knowledgeable and at ease with esoterica ranging from "bandwidth" to "bitstreams."
By the mid-1990s he was being lionized as a "true American genius" by the Godfather of the American right, Rush Limbaugh, and was commanding speaker's fees of $20,000 and up; eventually they would touch $100,000 per appearance.
Once the tech bubble popped, the most devoted of his followers began insisting that he had never been a stock picker at all but rather a social critic and a commentator.
However, the evidence of the era says otherwise, as he wrote obsessively — and increasingly enthusiastically — month after month, on the bright, world-changing promise of companies throughout the digisphere, and in particular, of those involved in telecom.
These latter companies formed what Gilder dubbed the "telecosm," and he conjured forth their future with all the proselytizing excitement of an Elmer Gantry.
Although he always came across as thoroughly informed on any company or subject he addressed, the quality of his investment advice seemed to deteriorate as rapidly as the market itself rose, eventually becoming little more than conclusory sound-bites.
CONSIDER Wave Sys tems Corp., where Gilder served as an outside board member in the spring of 1996.
With the company's Nasdaq-traded stock selling for about $1.88 per share, he championed a man named Steven Sprague to become the company's president and chief operating officer.
Saying of Sprague, "I have spent the last 20 years of my life interviewing and observing technology CEOs, and I believe Sprague has the potential to be the best of the bunch."
In fact, Steven is the son of Wave System's founder and chairman of the board, Peter Sprague. Other than that, Steven possessed no notable credentials for the job at all.
Nonetheless, roused by what came to be known as the "Gilder Effect," Wave System's stock began to climb, and by the time the tech bubble popped in the spring of 2000, it was selling for more than $50 per share.
Thereafter the stock quickly plunged back to the $2 range, and with the Gilder name no longer working its magic, the company issued a series of stock-hyping press releases about deals with Intel and IBM that caused the Securities and Exchange Commission to open a formal securities fraud investigation in February of 2004 that is still under way.
Nine class action suits and three shareholder derivative actions have also been filed, naming Sprague as a defendant.
During the entire course of its life, from its founding in 1988 until today, Wave Systems has never turned a dime of profit, with cumulative losses to date totaling more than $256 million.
IN a similar vein of over- the-top, impulsive enthusiasm, consider Gilder's endorsement in December 2000, through one of his newsletters, of a company called Aura Systems, Inc., which he claimed to be playing an important role in a newly anointed Gilder niche that he called the "powercosm."
At the time of this endorsement, which the company quickly exploited through a stock-hyping press release, Aura had already been identified publicly as the target of a massive SEC fraud investigation, and been delisted from Nasdaq.
Meanwhile, the rogue Lancer Group of hedge funds had begun illegally acquiring shares in the company, along with a cabal of other stock-market fraudsters.
Gilder's most bone-headed tout of all involved a Canary Islands hotel and insurance company called Xcelera.com, which soared 74,000 percent on his claim that it possessed some kind of secret sauce for speeding up the downloading of pages on the Web — which he cleverly, though glibly, derided as the World Wide Wait.
But the promise proved to be a mirage and the stock has since collapsed from $112.50 to a current price of 94 cents.
Against that backdrop it is not surprising that one Robert Picow, the chairman of Cenuco — the focus of some critical recent coverage in this column — should have turned up as one of the listed speakers at Gilder's upcoming conference in Lake Tahoe.
Now, Mr. Picow is a fine man I am sure. But the description that appears of his company on the conference Web site, as a company that is a "pioneer in software-based, remote video monitoring systems," is not the whole story.
In fact, it's about 15 percent of the story.
The other 85 percent of the Cenuco story, which is missing entirely from the company's description on the Gilder/Forbes Web site, is Cenuco's real business, which consists of running an Alabama-based "distance learning" business known as "Barrington University."
In the same way that Cenuco is not really a tech company, Barrington U. is not really a university. In fact, Barrington is nothing more than a so-called "diploma mill," defined by Webster's dictionary as any organization that issues essentially worthless college degrees for a fee.
Bottom line for investors? Gilder is by all accounts a charming fellow. And giving him the benefit of the doubt, he may do plenty of good research a lot of the time — or at least some of the time.
But when it comes to investing your hard-earned money on the say-so of a stranger, you want to look for someone with a track record of doing 100 percent of the job, all of the time — and frankly, folks, Gilder ain't it.
As his history shows, behind all that blabber about the telecosm lurks reality's mildew.
* Please send email to: Cbyron@nypost.com |
