Fidelity Boosts Microsoft Stake in Third Quarter:
Mutual Funds
By Kathie O'Donnell
Boston, Nov. 17 (Bloomberg) -- Fidelity Investments, the biggest U.S. mutual
fund company, reacquired a taste for Microsoft Corp. last quarter after spurning
the software giant three months earlier.
Fidelity bought 26.6 million Microsoft shares in the third quarter, it's third-biggest
purchase at $1.6 billion, according New York-based TF/Carson Group, which
gets its data from Securities and Exchange Commission filings.
In addition to Microsoft, Fidelity made big purchases of handheld computer
maker Palm Inc. and optical networking company Ciena Corp. in the quarter,
while selling major stakes in Nortel Networks Corp., Lucent Technologies Inc.
and Eli Lilly & Co.
The move back into Microsoft was an about-face for Boston- based Fidelity,
whose portfolio managers dumped 66 million shares worth $5.2 billion in the
second quarter, as the software maker slumped on concerns about the
government's antitrust case and the growing competition from wireless devices.
``It was being double whammied,'' said David Brady, who owns Microsoft in the
$1.5 billion Liberty-Stein Roe Young Investor Fund he runs. ``The world was
moving away from PCs and the concern became `How can they find something
fast enough to replace Windows' growth?'''
Microsoft shares have tumbled 41 percent this year, including a 16 percent slide
on April 24, after the Redmond, Washington- based company said sales rose
less than expected in its fiscal third quarter and would continue to lag analysts'
forecasts. The April slide cost fund investors $10.3 billion.
Overdone
Brady said worries about Microsoft's future are overdone and that it is well
positioned to fend off competitors like Oracle Corp. and BEA Systems Inc. While
personal computer sales may be slowing, he said Microsoft has the people and
financial resources to chase new Internet business as it develops.
``I think it will be a significant player in the tech sector for a long time to come,''
Brady said.
Though Fidelity boosted Microsoft overall during the third quarter, the stock no
longer ranked among the top-10 holdings of its biggest fund, the $101.6 billion
Magellan Fund, as of Sept. 30, according to Fidelity's October Mutual Fund
Guide.
Fidelity's biggest purchase in the quarter was Santa Clara, California based
Palm, as managers added 36.7 million shares of the wireless devices maker
worth $1.94 billion to their portfolios. Ciena was No. 2, with purchases of 14.5
million shares worth $1.78 billion, according to TF/Carson.
Biggest sales in the quarter included 35.6 million shares of Nortel Networks
worth $2.12 billion and 51.6 million shares of Nokia Corp. valued at $2.05 billion.
Fidelity managers also unloaded 21.3 million shares of drugmaker Eli Lilly worth
$1.73 billion, and 41.6 million shares of Lucent Technologies Inc. valued at $1.27
billion during the quarter.
Fidelity's biggest holding overall in the quarter was 351.6 million shares of
General Electric Co. worth $20.3 billion. GE was the second-biggest holding in
the second quarter.
Cisco Systems Inc., the second-quarter's top holding, slipped to second place in
the third quarter at 327.5 million shares worth $18.09 billion. Exxon Mobil Corp.
was third at 142.8 million shares worth $12.73 billion.
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