Internet: Jamie Dimon: Internet Valuations are Going to Blow Apart
Senior Analyst: Adam Lowensteiner (12/20/99)
In a rare appearance, Jamie Dimon, former president of Citigroup (NYSE:C - news) , gave a speech last Thursday night in Manhattan to discuss the changes occurring in the U.S. economy.
Dimon, who was speaking at the 92nd St. Y, spent much of time discussing (no surprise) the Internet. 'If you really think about it, the Internet is a slow, pathetic technology,' Dimon said, referring to the notion that because of a lack of broadband, the Internet is not nearly as productive now as it will be in future years.
Once the Internet is instantaneous, which should be two to five years from now with the broad use of broadband, only then will it have more of an impact.
Dimon also compared the Internet to the telephone. The telephone was a great invention, but not if just a few have access to it; but if 100 million people use the phone it has more importance. Although the Internet is slow, it also has a limited reach currently, as not everyone has access, let alone access to a computer.
Investors must remember that 'technology is totally unpredictable,' Dimon said. He proved his point by noting that in 1915 there were 15,000 car companies in the United States, and today only two remain.
Dimon was trying to make this analogy in regards to Internet stocks. Obviously there were no competitors before hand, as the Internet is a new technology, but a lot of the .coms are going to have to go up against big companies to compete, even if they are the first to a new industry, Dimon said.
Dimon used Wal-Mart (NYSE:WMT - news) as a prime example throughout his talk. Unlike the Internet companies, there were retailers prior to Wal-Mart. But Sam Walton executed his strategy, by giving each customer what he wanted, at lower prices.
Dimon also noted that execution is key. 'IBM should have owned Dell, Compaq, and Intel,' he said, noting that if IBM had thought outside the box, it would have long ago gobbled up those tech stalwarts.
But despite the numerous ways in which the Internet has affected the economy, as well as our culture, Dimon believes that 'Internet valuations are going to blow apart.'
Dimon especially was nitpicking at those companies that have a $10 billion market caps and $17 million in annual revenue, or thereabouts. His predicts that a meltdown will occur in February, May, or July of next year, as these months are after a quarter's end and earnings results would be out, leaving investors to sell on bad news.
Super Bowl Folly
'Some [Internet] stocks will be pennies,' commented Dimon. He is awaiting to see how many Internet companies blow all their money on advertising during the Super Bowl in a few weeks. 'I bet those companies won't be around within six months,' joked Dimon.
Dimon also believes that there could be loads of de-mergers with the Internet companies, and that a new government is definitely going to keep a close eye on privacy issues regarding the Internet. If some of these catalysts do kick in, Dimon feels the market will be a 'very, very bloody battlefield.'
For now Dimon is enjoying his 'free time' with his family, and waiting for the right opportunity to arise. All types of companies have approached Dimon, including a retailer and a venture capital firm in Jerusalem. But Dimon is likely to stay put in the U.S. and in the industry that he knows best -- banking.
'I can help at a financial services firm,' said Dimon. He noted that if he became CEO of the retailer that approached him, his first task on the job would be to visit one of its stores because he had no clue as to what they do.
Bottom Line:
So where and when will Jamie Dimon reappear on Wall Street? 'I need to be happy,' and I'd like 'one thing for ten more years,' concluded Dimon. Only time will tell. |
