I "GUESS" Seymour is changing his tune.....(Comical said a member of this board)
Interesting interview with KSDO (San Diego)whom interviewd Fred last week. (Edig near bottom)
I think that the AOL interview should be reread in it's entirety after reading this interview.
Q&A With Jim Seymour on KSDO.com
By Jim Seymour
Special to TheStreet.com
1/12/00 4:24 PM ET
Wall Street Review recently interviewed Jim Seymour. Wall Street Review can be heard Monday though Friday on KSDO.com and on KSDO AM 1130 in San Diego from 6 to 7 p.m. EST. Jim Seymour, who writes TSC's Tech Savvy column, spoke with Wall Street Review on Jan. 4 2000.
Mike Green: All right, welcome back everybody, it is a Tuesday edition of Wall Street Review and our guest today is none other than Jim Seymour. He is the president of The Seymour Group, an information strategies consulting firm. He's also a longtime columnist for PC Magazine; and he's a columnist for TheStreet.com. Jim, how are you doing today?
Jim Seymour: Well I guess like a lot of investors I'm sitting here hurting right now, from losing money today. It was an amazing day in the market.
MG: Well, from the looks of what your "25 for 1999" did, though, you're still pretty well ahead of game to the extent that you actually put your money where your mouth was or your typewriter was.
JS: Well I was pleased that the portfolio on TheStreet.com that you talked about that I put up was up about 108% for the year. Certainly there are some fund managers who beat that, but overall I think it was pretty good and I feel good about it. The trick is gonna be to repeat that kind of thing in what I think is going to be in some ways a very difficult year.
MG: All right, well let's get right into that. It was a very good 1999 for you but your "25 for 2000," I see here not just what it is, but "stocks that define markets," and let's get right in there. Who's on the list?
JS: Well I divided the list this year into six categories: computer, wireless, consumer web, broadband, net infrastructure, and business to business, because I think those are six categories people can understand and they're all going to have a lot of action this year.
Computers is a pretty short list. They're only a couple of companies I'd want to own this year, SUN and DELL. Those are neither workstation nor PC plays but server plays. SUN just owns the business for higher end servers for the Web and DELL is doing well and going to do a lot better this year in conventional servers for local area networks and business.
MG: What might be a disappointment in that area?
JS: Oh, I think in general the disappointment is what the economists like to call an "exogenous factor," whether in fact corporate spending picks up as fast as we all think it's going to pick up in this first quarter, after the slowdown while people made sure their Y2K fixes were working.
On the SUN side of the equation, it's whether in fact the web continues to grow as fast as it has been growing. I think in both cases the answers are positive. The web is going to continue growing and rapidly and SUN is going to sell a lot of web servers, and in corporate America DELL is going to continue to do well and in fact keep doing better in selling corporate servers, file servers.
MG: All right, your second category here is wireless. Now that's an area certainly near and dear to our hearts out here in San Diego but who do you like in the wireless area?
JS: Well there are a couple of people out there who've made some money in QUALCOMM, aren't there?
MG: Just a couple.
JS: In fact I think this is going to be a tough area to make money in this year. The year after is going to be explosive but I think the big winners are probably going to include NOKIA, the Finnish handset maker. QUALCOMM will move back into being a seller of ASIC chips and licenses on its patent portfolio.
MG: Essentially KYOCERA bought that QUALCOMM handset business out.
JS: Right.
JS: Anyway I think NOKIA and PHONE.COM are going be good bets for the wireless division here.
MG: Tell us a little bit about PHONE.COM, because this on the surface, is it just another dot-com stock losing a zillion dollars or is there really something deeper here?
JS: PHONE.COM has a nice play. They have developed a wireless phone-sized browser, and by size here I mean how much memory it takes up, and they've licensed that nearly to all the important players in the business. These are companies that want to make sure that when you buy a digital cellular phone made by them this year -- you'll be able to use them in the years to come to receive email and web pages -- obviously very redesigned web pages, but the key is to have that little minibrowser in there. There is a standard called WAP, one of these crazy computer industry names, which stands for Wireless Application Protocol and in fact PHONE.COM has sold almost all the members (of) the Wireless Application Protocol standard group the right to use its little phone-sized browser. About half of the phones sold this year are going to have some kind of browser embedded in them, and almost all those browsers are going to come from PHONE.COM.
MG: Hmm, OK. So those are your two for the wireless, it's NOKIA and PHONE.COM.
Jim Benham: Yeah, must be tough to twiddle these things down to just a couple of picks in each area.
JS: It's really tough, and in fact I have a wonderful stack of emails from readers now who all want to know why isn't X on the list.
JB: Right.
JS: I should do a little keyboard macro to answer these things that says "'cause there's only 25 slots and a 25 name list." There are a lot of companies I'd like to pick but when you have to get down to twenty-five, well cutting the last ten were the hardest. Y'know where companies like QUALCOMM for example that didn't make the cut for me. But I think there are great companies that are going to continue to do well, i2 is another good example of one that's not there. It's really hard to when you get down right to the wire on cutting these lists.
MG: Let's get into some of the consumer web stocks. We're all familiar with the big names, the AMAZONS, the YAHOOS, the EBAYS, what do you like in this area?
JS: Well, you mentioned two that I like, AOL and YAHOO, which are both great brands. and are going to well in this next year. I think CMGI, which is, as you may know, is kind of a portfolio company, or sort of mini-mutual fund, in effect; it's going to do really well too. CMGI has gathered a lot of companies with early investments and started up some others and I think GMGI is going to have a big year.
JB: Yeah, not that some of these other companies you mentioned didn't have a big '99s but obviously AOL, YAHOO and CMGI had huge years. You see that the growth will just continue?
JS: I think it's going to continue but one thing I want to say really loud and clear, that I got in both parts of this column you're talking about, both the part that ran yesterday and that part today in TheStreet.com. That's this idea, these stocks in almost every case are really fully valued right now. They had great run-ups last year, which means jumping in right now is tough now. I should modify the phrase right now; at the end of a bloody day like this, some of these look cheaper to get into.
NOKIA for example was down today, others were way down but the point is they're all pretty richly valued so I don't think anybody on earth should go out and buy this list tomorrow. I think they should look at it because these stocks are tells -- that is to say, if you watch them they can tell you what is going to happen in the market this year. And more, if you're interested in buying you should watch and buy them on pullbacks, perhaps the kind of pullback we saw today -- though I've got to say I think what happened today is going to continue tomorrow. I think it's premature to jump in.
MG: I hope so.
JB: You know one thing that strikes me ... I was talking about this with Mike. With Yahoo, it's almost like Yahoo is an Internet version of America Online.
JS: That's a great analogy. Those two are the name-brand Internet stocks in America today, and I don't see that changing.
MG: OK but take a look at your list, you've got CMGI on here also and CMGI is just one of those stocks that had a fabulous run since what, back in I think '94-'95, when these guys got going.
JB: I think it was one of the top stocks of the '90s.
JS: I should say CMGI had a fabulous hit today too. It was down more than 32 1/2 to 293. I think at 293 CMGI is still fully priced. I think there's a little more air to come out, but I don't want to set price targets. I think CMGI is going to be a lot higher come the end of the year.
MG: OK. And you know one thing I don't know before we move on to broadband, but you hear so much about this business-to-business type stuff going on and yet we don't see that area so I'm sure you got a couple of emails.
JB: No, he's got that in his Part Two here.
MG: Oh, I see, Ok, Ok , Ok.
JB: Come on, get with the program!
MG: I'm just reading the one here, I'm just reading the one. Let's move on to broadband then, ok? Who do you like in this space?
JS: Well, broadband was the rich play last year, and I think there is a fair amount of argument this year among people in the business about whether it's going to continue to be the hottest play or whether wireless is going to be the hottest play -- or maybe, if you view technology broadly, whether in fact we're going to see biotech emerge as the hottest part of this year.
Whether it's the hottest or not, I think business to business is going to continue to be a very hot part of the market and I think some of the winning plays this year are going to be INTERNET CAPITAL GROUP, which of course did very well last year -- another one of those holding companies or mini-mutual funds, like CMGI -- also COMMERCE ONE, which has this fabulous deal with GENERAL MOTORS and which benefited from some of the market action today.
MG: Yeah, it didn't go down today.
JS: Well, what happened with COMMERCE ONE was very interesting today. They're cruising right now on a deal they announced back in the late fall with GENERAL MOTORS, where GENERAL MOTORS says they're going to build a thing called Market Site, which will be a huge e-commerce site for GENERAL MOTORS and they're going to build it in partnership with COMMERCE ONE. Well, that's a heck of a deal! What a wonderful endorsement from a big company, for COMMERCE ONE,
GENERAL MOTORS already had a deal going with FREE MARKETS, a big competitor to COMMERCE ONE. Today, very painfully, the CEO of FREE MARKETS announced GM has pulled out of their deal with FREE MARKETS and is going to go just with COMMERCE ONE. COMMERCE ONE soared today, even in a rotten market and boy, FREE MARKETS just fell like a stone.
JB: You know, take a look at this too. While you were talking about INTERNET CAPITAL GROUP and I'm going to go back to a stock you already spoke about, CMGI, how do you value things like that? I mean maybe a tip or two for people who aren't used to looking to these types of stocks or holding companies/ venture capitalists.
JS: Well it's tough to value stocks like that especially these polyglots. CMGI and INTERNET CAPITAL GROUP both involve trying to go in and make some sense of what the value is going to be of those companies they hold, and also looking for whether an INTERNET CAPITAL GROUP or CMGI brings anything to the party. Both of these have a little bit of the Japanese keiretsu idea, which means that by getting these companies together they try to find synergies among the companies to the advantage of their shareholders.
So that, just as KLEINER PERKINS, the venture capital shop up in the valley, loves to back companies they think they can get to work together, INTERNET CAPITAL GROUP and CMGI both bring something to the party beyond just money, by being companies which actually sponsor forums to get companies in which they have substantial stakes together in the same room to see if they can they do deals together. So in addition to trying to value the individual part, the individual company owned in part by a CMGI or a INTERNET CAPITAL GROUP, you've also got to look for whether in fact INTERNET CAPITAL GROUP or CMGI can do more than stock picking and the synergy they can create adds some value as well. I think it does.
MG: One any we have yet to talk about is the broadband area. Who do you like here?
JS: Broadband is going to have a wonderful year. It had a darn good year this past year. Broadband is going to soar this year. I think on the chips side that BROADCOM, TEXAS INSTRUMENTS and PMC SIERRA are in a great position to benefit. I think there are some others winners here. I think CORNING, which makes almost all of the fiber cable that's buried in this country, and GLOBAL CROSSING, which has been a company specializing in sub-sea cabling abroad but now is getting a big way into hosting of corporate web sites through its global center division, and finally JDS UNIPHASE, are the best bets. I think Broadband is going to be a really rich area this year -- you could easily if you were very determined and a little bit brave put together a great broadband-only portfolio that would perform very well.
MG: And this must have been an area that was tough to not include some other names I would guess.
JS: Boy, it is in all the areas, but sure, broadband was tough. It was tough not to go out there and look at some of the broadband providers. But broadband providers, while they're going to do ok, are not a great place to make money this year.
MG: No, the other thing too is these specialty chip makers, the BROADCOM, the PMC SIERRA's and ZYLINK -- not on the list, but still of that ilk -- again these are also trading quite expensive right now, wouldn't you agree?
JS: I agree and I guess I should repeat what I said earlier in the show.
MG: The Disclaimer!
JS: That getting in now is pretty risky.
MG: Now, what about over in the infrastructure area. I think some of the savvier investors out there have been playing the net, with this infrastructure area. Who do you like in the infrastructure area?
JS: Well, I think the easy pick, the obvious pick, is to buy CISCO. CISCO, I think, is the strongest company out there, and indeed I did a column just before Christmas called Santa Jim, that predicted for the next year if you want one safe, big, growing, company, CISCO is that great company. CISCO in fact I think is as close we have these days to a buy-and-hold company -- you know, the old "put the shares in the sock drawer" kind.
MG: One decision.
JS: It's really a sock-drawer kind of company.
MG: What about some other names, we may not have heard of in this area?
JS: Less well-known but still big and prosperous, especially after their IPOs last year, are companies like JUNIPER and SYCAMORE. I think EXODUS, which is a wonderful company involved with web hosting, is going to soar again this year. It soared last year as well. INKTOMI is going to be there, it's a really up. The smallest company on my list is ION NETWORKS and understand this is the longest-odds play. ION NETWORKS -- the symbol is IONN -- is a company that's trying to do performance monitoring and performance monitoring is getting critically important as everybody looks at the importance of faster performance. You've got to know how it's doing now, if you know about how to make it better. IONN actually climbed against this brutal market today, which is also encouraging.
MG: Let's here about KANA.
JS: KANA COMMUNICATIONS is an intriguing company that helps web site managers manage their relationships with their people who come to the site through email, through all sorts of tricks. And also it's great to talk to KANA customers, KANA customers rave about KANA, about how supportive they are, about how well everything works, about how easy it is to get implemented the right way. I think KANA is at a really hot spot in the market right now.
JB:You know -- and I mentioned this last time you were on the program -- we love your writing about the digital music area, and I'm wondering where do you go from here, you've done your "25 for 2000," are you going to be intensifying your efforts to cover that digital music area this year?
JS:Well, it's going to be an interesting year there, as we're seeing a lot of players come to market. We saw at COMDEX, for example, two new, different SONY players. The DIAMOND RIO people have their 500 -- it was one of the hits of Christmas. There was a huge run-up today in a stock in your backyard; the EDIG people, the EDIGITAL people who have an operating system that may or may not prove to be critical for a lot of these devices. They think it's going to be very important. This is a stock that was selling for 6 cents a year ago and was going for $5 today.
JB:Do you think there's something here behind this, I mean it's headed up by a guy, who is, who had a lot of things he's started in the past that have never come through for investors?
MG:Yeah and 100 million in debt too.
JS:I wrote a pretty skeptical column or two about EDIGITAL in the middle of the summer, and I guess I haven't changed my opinion. One of the things that worries me about EDIGITAL is they have an enormous float out there, so it's going to be hard to make mone -- but somebody who bought it for a dollar and a quarter three months ago and saw it trading for $4.75 today would say I was crazy because it tripled his money and it'd be true.
So this is a company that has had a nice run-up, not for any reason I can detect. There are some of these new players in the next few days, there's a trade show now yet EDIGITAL may or may not be in some of these, I think its kind of scary, but you know I've have to acknowledge the market has said good things about this company, people have made a lot of money in the past few weeks.
JB:And LIQUID AUDIO is strong today.
JS:LIQUID AUDIO is very strong. And there's MP3.COM. We have a lot of strong players here. The real problem now is that the damned record companies won't get together on a real standard!
MG:Well we're going to have to cover that next time on the show. We really appreciate you coming on, Jim.
JB:Jim, thanks so much.
JS: Thanks, guys. I really enjoyed it.
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