From IBD.
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Copyright :Investor's Business Daily
Title :Telltale Tech Signs Point To ‘Up' Year In
2000
,
you've made it into the 2000s and things seem to
be fine. Assuming Y2K has been hurdled, what's
the forecast for the hot tech industries? Here's a
look:
Telecom
Talk is cheap. Well, maybe cheap isn't the word
quite yet for cell-phone users. But it's getting
close, as competition heats up among wireless
phone services.
To be sure, less expensive air time is one reason
wireless services have grabbed the
telecommunications spotlight.
The wireless telecom sector ranked among
Investor's Business Daily's top-performing
industry groups in 1999. Most analysts expect no
letup this year.
"We're going to see strong subscriber growth,
further consolidation among companies to fill out
their national coverage, and the start of wireless
(services) meeting the Internet," said Linda
Mutschler, an analyst at Merrill Lynch & Co.
Cell-phone use is rising as consumers get more
choices for service providers. Four or five
wireless carriers now compete in most major
markets. Some are rolling out big-bucket monthly
rate plans that eliminate roaming and long-distance
charges.
The U.S. wireless industry ended the year with
about 84 million cell-phone subscribers - or almost
one out of every three people, analysts say. By the
end of 2003, U.S. penetration will be 55% to 66%,
pundits forecast.
More people are disconnecting their wireline
phones and going all-wireless.
"We're going to see some real examples of
landline displacement and growing momentum
behind wireless data by the end of 2000," said
Mark Lowenstein, an analyst at the Yankee Group
in Boston.
The market researcher estimates that more than
500,000 people will use only wireless phones by
late 2000, double the number today. Regulators
think that trend could help break the stranglehold
that regional Bell phone companies have in local
phone markets.
Telecom firms are scrambling to buy wireless
assets.
MCI WorldCom Inc. hopes to complete its $115
billion merger with Sprint Corp. by late 2000. The
purchase would add Sprint PCS to MCI
WorldCom's arsenal.
In Europe, Vodafone AirTouch PLC is trying to
buy Germany's Mannesman AG to expand its
global reach. Vodafone's $148 billion hostile bid
has yet to succeed. But it might, analysts say.
AT&T Corp. thinks the time is right to give its
shareholders a wireless tracking stock. It plans to
raise $8 billion to $10 billion in an initial public
offering in the spring. It could be the biggest U.S.
IPO ever.
SBC Communications Inc. says it's considering
such a move, too.
Another wireless player to watch is Bell Atlantic
Corp. It will own a formidable national wireless
network if regulators approve its merger with GTE
Corp. The combined firm would have 12 million
cell-phone customers, the most in the U.S. Bell
Atlantic and Vodafone AirTouch in September
inked a new pact linking their U.S. wireless
assets.
AT&T, Bell Atlantic, Sprint PCS and Nextel
Communications Inc. are well-positioned with
coast-to-coast networks, analysts say.
As they upgrade networks to new digital
technology, wireless carriers are eyeing revenue
from data services such as Net access. As prices
for voice calls fall, data services will give wireless
carriers a chance to boost profit, says Rob
Norcross, an analyst at Mercer Management
Consulting Inc.
Wireless equipment makers are doing their part.
Expect a new crop of Web-enabled phones this
year from the likes of Nokia Corp., Motorola Inc.
and LM Ericsson AB.
- Reinhardt Krause
PCs
In the personal computer market, analysts expect
more blurring of the lines between sellers of
hardware and services.
There isn't much money to be made selling PC
boxes, except at the high end. That's left
manufacturers scrambling to hawk additional
peripherals and services.
PC sales are still growing fast. International Data
Corp. expects U.S. shipments to grow 19.5% in
2000, down from 23.5% in 1999 but still quite a
healthy clip.
Rebate deals in which customers received a $400
discount if they signed up for three years of
Internet service were popular over the holidays.
Pundits say many PCs themselves will continue to
be sold for little or no profit in the coming year.
"People are willing to sell a PC for $400 - or even
nothing after a rebate - because they're getting the
customer," said IDC analyst Roger Kay.
Dell Computer Corp., Compaq Computer Corp.
and others plan to push home-networking products
aggressively. Noting that many households have
two or more PCs, the companies expect to sell the
software and gear that link those PCs with one
another and with peripherals, such as printers.
- Nick Turner
Microsoft
A big question this year: How and when will the
Microsoft Corp. trial end?
The saga already is more than 18 months old and
could, with appeals, drag on for years. The case
was filed by the Department of Justice on May 18,
1998, and went to trial the following October.
A ruling isn't expected until March at the earliest.
Many legal experts expect presiding Judge
Thomas Penfield Jackson to side with the Justice
Department. In his findings of fact, released Nov.
5, he called Microsoft a monopoly that's stifled
innovation.
Even without a verdict, the findings of fact
triggered a wave of private class-action lawsuits
against Microsoft. More than 50 have been filed
so far, and - unlike the Justice Department suit -
they seek monetary damages. Penalties could cost
Microsoft hundreds of millions of dollars.
If Jackson rules against Microsoft in the spring,
the company likely will have a tougher time
fending off the private lawsuits, experts say.
Ultimately, though, Microsoft is expected to fare
better in the appeals process, even if the case
makes its way to the U.S. Supreme Court.
The Redmond, Wash., software maker already
has plenty on its plate.
Feb. 17 is the date it says it will release Windows
2000 - its biggest new operating system since
Windows 95 hit stores in 1995. The new software
is aimed at business users. A consumer version,
for now code-named "Millennium," is due around
June.
Microsoft's future hinges on a successful launch,
because so many of its products are tied to
Windows 2000. And it needs to fend off rival
operating systems such as Linux.
"It's a keystone product," said Rob Enderle, an
analyst at Cambridge, Mass.-based Giga
Information Group. "It's critical to Microsoft for
Windows 2000 to succeed."
- Nick Turner
Servers
If the advent of the Internet has proven anything,
it's that once you think you've seen it all, you
haven't.
In 1999, one such thing was Linux, the free,
open-source computer operating system. By
midyear, many people still didn't know how to
pronounce Linux (Linn-ucks) but by year-end,
investors were kicking and screaming to get in on
Linux IPOs.
Analysts say shipments of Linux will rise by 25%
in 2000, and companies such as Linux distributor
Red Hat Inc. and server makers Cobalt Networks
Inc. and VA Linux Systems Inc. will continue to
grow. Analysts expect other Linux firms to go
public in 2000 - before the field starts
consolidating.
As hot as Linux has become, it still trails far
behind Microsoft's Windows operating systems.
Sun Microsystems Inc. will be pushing for a
breakup of Microsoft. Sun, which leads the server
market, will probably try to line up more allies and
get more young Internet firms online with its
products through a new program that offers
special deals to Internet firms that haven't even
sold a thing yet.
Sun is expected to continue going after Microsoft
in the area of Web-ready home appliances.
Microsoft's new Web Companion, a
textbook-sized device designed to link to the Web,
is expected to ship by midyear. Microsoft is
touting the Web Companion as a harbinger of
appliances that will access the Web from any
room in a home. Likewise, a new deal between
Sun and Sony Corp. has the two companies
working on similar home appliance technology that
could be available next year.
Hewlett-Packard Co. is expected to continue with
the biggest re-invention in the 60-year-old
company's history. Under the watch of Chief
Executive Carly Fiorina, HP will keep pursuing a
$200 million campaign to turn the computer giant
into an Internet leader with electronic services,
hardware and software offerings.
- Rex Crum
Tech Services
This sector, from system integrators to Internet
consultants, is expected to continue to prosper in
2000 as demand grows for computer-related
services.
These companies are focusing on helping their
customers move online.
"The companies that have the skill bases and
market strategies that focus on the Internet will do
the best," said Moshe Katri, analyst with SG
Cowen Securities.
Many analysts say technical and engineering
expertise will begin to outshine creative skills such
as Web-site design and branding.
"The companies that are really going to do well
are those that have the strongest technology
capability," said Katri. He mentioned Sapient
Corp., Braun Consulting Inc. and Proxicom Inc. as
among the Net services companies he considers
the best.
Yet even old-school services firms, which were
doing systems integration when many of today's
Internet millionaires were still in diapers, will
benefit. They've seen the handwriting on the wall
and are shifting to the Web.
"Both Electronic Data Systems Corp. and
Computer Sciences Corp. have put considerable
resources into their e-business strategy over the
past year," said Bill Loomis, an analyst with Legg
Mason Wood Walker.
- Matthew Benjamin
Business Software
This sector slowed in 1999 as companies held off
on software purchases until the Y2K bug
departed.
In 2000, corporate America will begin a
software-shopping spree, looking for applications
to help them compete.
"Every indication we have right now is that 2000
will be an exceptionally good year for business
application software," said Hugh Bishop, an
analyst with the Aberdeen Group, a market
researcher.
Products designed around the Internet will sell
best, analysts say.
Traditional business software companies like SAP
AG and Peoplesoft Inc. are making their systems
more Web-centric, but "those are big ships to turn
around," said Bishop.
Smaller software makers like Ariba Inc. and
Silknet Software Inc. will prosper. Large ones that
are making a swift Internet transition - I2
Technologies Inc. and Oracle Corp. are two - also
will do well, as software via the Internet begins to
revolutionize business.
"One hundred years of business practices are
under siege as the economy is about to benefit
from the latest Internet software technology," said
Bob Austrian, an analyst with Banc of America
Securities.
- Matthew Benjamin
Chips
A long chip slump, says the industry's largest trade
group, is over - and you can make that official.
Chip companies were hit hard starting two years
ago after they built too much chip-making
capacity. To make matters worse, PC prices
plummeted, taking the prices of computer chips
down with them.
The Semiconductor Industry Association, though,
at its annual forecast in late October said 1999
sales would rise 14.7% over 1998, to $144 billion.
As it turned out, that optimistic forecast wasn't
optimistic enough. Chip sales have surged these
past two months, says Doug Andrey, the SIA's
chief statistician.
"It's running stronger than anticipated," he said.
"This gives us more momentum going into the year
2000." Now the SIA is looking at 1999 sales of
more than $145 billion, topping the year-earlier
total by 15.6%.
That's just a start. The SIA sees faster growth in
2000 and 2001.
The Internet is the biggest driver of chip sales,
says Jean Philippe Dauvin, chief economist for
French chipmaker STMicroelectronics NV.
The Net's driving demand for all sorts of devices
that need chips.
"Without the chips, the Internet can't grow," he
said. "I believe the semiconductor industry is just
born."
Demand is quickly gobbling up chip-making
capacity. "Capacity utilization is the highest it's
been since 1997," Andrey said.
Overall, that figure is at 91%, but it's 96% for the
more leading-edge manufacturing capacity, he
says.
- James DeTar |
