8/17/98 Fortune. 10 Stocks to Get You There. Nice quote from CSCO section -- "The networking game is only in the second or third nning."
pathfinder.com
Part 4: Technology
Nelson D. Schwartz
Technology
Projected
3- to 5-year
earnings
growth
Microsoft
Not even the U.S.
government will stop
Microsoft's growth.
25%
Cisco Systems
As Internet usage
grows, so will Cisco's
profits.
30%-35%
S&P 500
8%
Just about every investor today agrees that you
need to have tech stocks in your portfolio. No
other sector has the potential to grow as fast.
Unfortunately, Wall Street is littered with tech
wrecks once confidently touted as the next
Microsoft.
That's why the original Microsoft should be a core
holding for any long-term investor. Yes, the
company's stunning profit increases will slow
somewhat. And yes, the Department of Justice's
attack could distract Bill Gates and the software
giant's other top managers, though recent court
decisions suggest the government has little
chance of loosening Microsoft's grip on software.
But no other big company--not even Coke or
Intel--enjoys Microsoft's combination of market
dominance and growth potential.
There's much more to this story, though. Lehman
Brothers analyst Michael Stanek notes that
"Microsoft is entering the most lucrative
new-product cycle in its history." The release of
Windows 98 in late June has already far
surpassed initial estimates. But the next big thing
is Windows NT 5.0, whose promise is gigantic.
This industrial-strength program is aimed at
corporate networks and has the potential to take a
big chunk out of the $60 billion to $80 billion
market for enterprise software. That's roughly five
times Microsoft's current revenue base. So even
20% of that niche could double Microsoft's
revenues.
This bevy of new products also creates a high
degree of what analysts call "earnings visibility,"
so Microsoft is much less likely to deliver an ugly,
wealth-destroying surprise than other tech stocks.
And like Merck, Microsoft's sheer size should help
its performance. The software giant now equals
3.1% of the value of the S&P 500, so index funds
have to buy plenty of shares.
Cisco Systems, our second tech choice, has
much in common with Microsoft. This
networking-gear giant is fast becoming the
dominant player on nearly every level of its market.
And like Microsoft, Cisco is a fearsome competitor
with a long history of either buying or beating any
company that threatens its dominance.
In addition, as Internet usage grows, so will
demand for Cisco's routers, switches, and other
Internet backbone equipment. And recent deals
like AT&T's purchase of TCI could mean hundreds
of millions in new business for Cisco as Ma Bell
upgrades and expands TCI's outdated cable
infrastructure.
Cisco's profit growth will probably slow--but merely
from white-hot to red. Conrad Herrmann, manager
of the Franklin California Growth fund, estimates
that Cisco's earnings will grow over 30% annually
during the next three to five years, more than three
times as fast as the typical S&P 500 company's.
Says Herrmann: "Cisco today is like Intel at the
dawn of the microprocessor revolution. The
networking game is only in the second or third
inning."
| Introduction | Global Brands |
Pharmaceuticals | Technology | Banking |
Euro Stocks |
Issue date: August 17, 1998
|
