Sage Host: Please welcome Pablo Galarza,
columnist for MONEY Magazine.
Pablo Galarza: Hi everybody.
Question: Transmeta Corporation was a big success on
Tuesday and INFICON Holding AG was a disappointment
yesterday. Which one was more indicative of the current
market for Initial Public Offerings (IPO)?
Pablo Galarza: I think the current market for IPOs is all
about the company, which means that the IPO market is
very weak, and the company's good investors will want to
own their shares and will bid them up. I think it is really
that cut and dry. I think people are far more skeptical
about IPOs and the market in general, and that just leads
to greater scrutiny by investors.
Question: Should we expect this weakness in technology
and Internet-related stocks to continue for several
quarters?
Pablo Galarza: I don't think so. I think the election has
really taken many people's focus away from the
technology sector. I think the inventory issues at Cisco
Systems, Inc. is also creating some havoc in terms of
investors reexamining growth rates they once truly
believed in. So, in a period of uncertainty, both politically
and in terms of growth rates for key industries like
telecommunications equipment, that is a big heavy to
weigh on in the stock market. Slowly, time will pass, and
these sentiment-related issues will subside and people will
get excited about these stocks again.
Question: What is your opinion on CIENA Corporation?
Pablo Galarza: I don't really have a strong one either
way. I always hear good things about it in terms of the
technology they own, yet I never hear any great
enthusiasm for its stock, which sort of leads me to believe
that maybe it doesn't have what it takes. Again, I don't
know that for sure. All I know is what investor opinion or
observations say.
Question: Is Dell Computer Corporation's lowered
guidance for the coming fiscal year indicative of a slowing
personal computer (PC) market, or is it simply
company-specific issues?
Pablo Galarza: It is a little bit of both. Everyone knows
the PC industry is slowing, but it is still logging pretty
good double figure growth in a business that has been
around for 20 years. On a company specific side, Dell has
led investors to believe that moves into higher average
selling price boxes, servers and the like, would lead to
richer profit margins. So far that hasn't been the case.
Making computers is a manufacturing business. The profit
margins are thin and you hope to have a real efficient
operation, but you are also always looking for ways to
squeeze more profit out of your existing businesses. Dell
will be fine. I don't think they're cheap right now, but I
don't think there's any real reason to worry, especially at
these prices.
Question: When will we rally?
Pablo Galarza: Soon I hope! I think the economy is still
strong and fundamentally, things are very sound. So, I am
confident going forward that things will turn around in the
stock market.
Question: Is Oracle Corporation a buy? It looks like they
have no competition in database. What is your outlook on
its future growth, and do you agree with Lehman Brothers
Holdings Inc. on its upgrade?
Pablo Galarza: Doesn't everybody already know they own
databases? They have been doing it for 10 years now.
The key for them is to build on those databases and
customers they have while serving them with databases,
doing a good job of cost cutting and doing a good job of
creating excitement over their new products. I don't think
the stock is entirely cheap, but I think it is a company one
should always look out for because it has delivered on its
promises of the last couple of years of being more
profitable more aggressive about getting into new
businesses. I just find it unsettling that key management
has been leaving the company. Management is definitely a
scarce commodity in any business, especially in a fast
growing one where it is essential. I don't know anything
about the Lehman Brothers upgrade; I don't know who at
Lehman Brothers covers Oracle.
Question: Can the venture capital holding companies like
Safeguard Scientifics, Inc. and Internet Capital Group,
Inc. ever recapture their former valuations?
Pablo Galarza: No, I don't think they ever will recapture
their highs because their highs were at such an absurd
level that only in retrospect can you appreciate the
absurdity. They are an IPO-driven company, and when the
IPO markets dry up, no one wants them, which may be a
good time to start sniffing around them. I think this is a
good time to examine the portfolio of companies and make
sure there are actually real businesses there that can be
sold off to investors. I think investors are finally beginning
to smarten up after a couple years of being dumb, so it
will be tougher to pass off the turkeys we have seen. It
would be tough for CMGI, Inc. to come out with another
MotherNature.com, Inc..
Question: As defense spending is expected to increase
significantly, which companies do you feel will benefit from
this?
Pablo Galarza: Raytheon Company, Lockheed Martin
Corporation, and Northrop Grumman Corporation.
Question: Does Transmeta have the potential to
dominate the microprocessor market for laptops and
Internet appliances?
Pablo Galarza: I don't think anybody has the potential to
dominate anything anymore. But does it have a great
technology? Definitely. When I say no one can dominate
again, people are too smart, they don't just want one
supplier. They want to be able to choose between three
minimally. Their technology is great and they're smart the
way they've built out their company. It's an interesting
company.
Sage Host: Thank you very much for joining us today, Mr.
Galarza! We appreciate your insights!
Pablo Galarza: Thanks everybody for showing up. Hang in
there!
money.com |
