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Strategies & Market Trends : Bowling Alleys and Tornadoes: G&K Hunting Grounds
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To: Mike 2.0 who wrote (13)7/13/1999 8:18:00 PM
From: Mike Buckley  Read Replies (1) of 153
 
Mike,

If EAI is in fact a new source of G's and K's, still with plenty of space for the grabbing, why did NEON blow their quarter so terribly?

The more I think about it, I'm not yet convinced EAI is destined to be a source of Gs and Ks. More and more front- and back-office apps have their own built-in EAI. I don't know if it's as functional as an EAI product from a specialist such as NEON, but it does offer a large obstacle to independent EAI companies.

In my umpteenth reading of the book, I came upon some info that might provide insight about NEON missing their quarter. It doesn't necessarily apply because I'm not intimately familiar with their situation, but it might.

Page 112: "When gorilla companies report revenues and earnings that disappoint, and their stock prices get dramatically lowered as a result, the key thing to keep in mind is that gorillas -- and usually the gorillas alone -- have a truly sustainable CAP that will reassert itself strongly on Main Street. This means they really do warrant holding, even though at the time it won't seem that way."

I'm not suggesting that NEON is already a gorilla. I don't follow the EAI space well enough to know. Considering that most EAI firms are still private, I don't know if anyone knows if there is a gorilla in the works. Regardless, the discussion about the end-of-tornado corrections on pages 110 - 112 provides insight that I think is also applicable to a certain degree to mid-tornado reactions to companies that stumble.

--Mike Buckley
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