I got this from a post by Stephen Karasick on the cents and sensibility thread, WIND pertinent is in bold.
Follow The Money At Networld+Interop, Stock Picks From The Show Floor
Ever wonder where you would put your money if you knew everything there was to know about the hottest technologies around? StockHouse asked some of the brightest minds in the world at one of the biggest technology conferences in North America where they are putting their money for the future. The answers may surprise you.
Las Vegas, Nevada, May 12 /SHfn/ -- Networld+Interop (N+I) is the largest networking conference in the world. Amid the glitz and glamour of Las Vegas, the digerati gather behind closed door to check out some of the hottest technologies in the world. Optical, wireless, gigabit Ethernet, broadband, routers, switches, security, semiconductors, and SANs (storage area networks) are all on display. The people on the show floor range from entrepreneurs to engineers to chief financial officers. What they all have in common is that they live and breathe technology. And they all seem to have an eye on their stock portfolios.
Some interesting trends emerge in talking with people on the floor of Networld+Interop. The first thing you notice is that they unanimously believe networking is the future of all technology. To them networking is the ultimate enabler of technology, because all technology will rely on networking solutions from here on out--consider how much network equipment was required to complete the Human Genome Project and you get an idea of why this world view is compelling and contagious. The second thing you notice is that they all own Cisco [CSCO].
By far and away the most popular stock among the tech-savvy population at N+I, Cisco holdings seemed almost a requirement for attending the event. After 2 days of asking people where they were putting their money and where they would look to put some in the future, only one attendee would say that they did not own Cisco stock and had no plans of buying any at all. Not that this ubiquity should be confused with whole-hearted endorsement. There were significant and well articulated concerns over the valuation of the company, its product lines and its potentially over-aggressive acquisitions strategy. However, almost every person maintained that though there may be concerns, the potential upside is too great to ignore. "Cisco is networking," said one quotable individual wearing a shirt from one of Cisco's direct competitors.
"Sycamore Networks, of next-generation intelligent optical networking fame, was the frequently the subject of furious and passionate debate."
While Cisco may have been public investment number one, there was also a list of the usual suspects that many investors could recite by rote. Microsoft [MSFT], Nortel [NT], JDS Uniphase [JDSU] and Lucent [LU] are core holdings for many of the investors at N+I. Notably, there was almost no concern among participants over Microsoft's legal woes. The consensus opinion was that Microsoft's upside is only a question of time. "No matter what happens in court there is just too much value at Microsoft to ignore long term," said one source.
While the usual suspects were usually listed off fondly, there was one widely held exeption: Excite@Home [ATHM] is no longer exciting anyone. While not as common as some of the others listed above, individuals who owned Excite stock were uniformly unimpressed and many were merely holding on with little hope until the fall when it might be time to move on. "It just keeps going down and down and down."
Aggressive investors who have already moved on and have been looking for the next big thing often had some interesting things in common. Aggressive investors looking to play the new networking technologies all seemed to have their personal list of favorites that often looked a lot like everyone else's. The trio of Extreme Networks [EXTR], Alteon [ALTN] and Foundry Networks [FDRY] was practically a mantra for some. If an investor was buying into one they would often buy into all three as a means of mitigating the risk (the idea being that at least one will survive and will make up for the loss of the others). Some investors dropped Juniper Networks [JNPR] into this group but most thought Juniper was already more comparable to Cisco than the more speculative three above. RedBack [RBAK] and Copper Mountain Networks [CMTN] were considered somewhere between Juniper and the highly speculative plays in the space.
Optical was another area where the aggressive seemed to like to play. "The highest risk--the highest reward," as one investor put it. Sycamore Networks [SCMR], of next-generation intelligent optical networking fame, was the frequently the subject of furious and passionate debate, and investors were often more than willing to play devil's advocate with themselves. Overvalued, undervalued or just hard to value, were common laments. Sycamore seemed to be the prime example of how hard it is to decide what a fair value is for emerging and potentially disruptive technologies. Nonetheless, there were many willing to say they do believe Sycamore and other all-optical systems plays represent an opportunity to invest in the Internet version 2.0. Another name often mentioned by people with this mind set was long-haul optical firm Corvis [CORV], which is set to IPO in the very near future. Another play on this space for the more sophisticated investor was to hedge into the space by playing Enron [ENE], an oil company that is also building out one of the world's most advanced fiber optic backbones and is pushing for a bandwidth as commodity trading system.
"The science behind Akamai is impeccable and that is why they will win."
Enron was also one of several plays providing wide area and metro area networks. Qwest [Q], Global Crossing [GBLX], PSI Net [PSIX] and 360Networks [TSIX], were all stocks people were holding for the long term. More speculative plays in similar spaces included RCN Corporation [RCNC], ICG Communications [ICGX] and Level 3 [LVLT].
In addition to companies involved in supplying the bandwidth that powers the Internet, companies optimizing the Internet were widely held. Akamai [AKAM], CacheFlow [CFLO], Digital Island [ISLD] and Inktomi [INKT] frequently recurred in portfolios. Akamai had a strong following among the engineering types, one noted that, "The science behind Akamai is impeccable and that is why they will win." In addition, application service providers (ASPs) working from an infrastructure angle seemed to be popping up on people's radar screens-very few individuals were invested in the space but several were looking long and hard at companies like, enterprise email outsourcing company, Mail.com [MAIL]. Mail.com solved Ford's [F] "I Love You" email virus problems late last week in only a few minutes after Ford decided to make the transition from beta to the full service after its internal email began to collapse. Storage company EMC [EMC] was another popular pick for people looking to play the infrastructure angle.
Semiconductors were also a hot item in many portfolios, but a consensus was more than difficult to come by. The selections ran the gamut, from Applied Materials [AMAT] to Xilinx [XLNX] and covered everything in between. Texas instruments [TXN], Broadcom [BRCM], Vitesse [VTSS], PMC-Sierra [PMCS], LAM Research [LRCX] and Citrix [CTXS] were all mentioned. Embedded software company Wind River [WIND] was also a popular choice for investors committed to the semiconductor space.
Wireless was an interesting topic at N+I that elicited a broad range of reponses. Nokia [NOK], Qualcomm [QCOM], Motorola [MOT] and Aether [AETH] cast long shadows; however, some smaller companies did pop up that were interesting. Canadian wireless positioning firms Sigem [O.SGEM] and Cell-loc [T.CLQ] were mentioned alongside their northern counterparts Research In Motion [T.RIM] and 724 Solutions [SVNX] as wireless stocks that should take off again for the patient. Neopoint [NEOI] has yet to IPO, but several individuals on the floor believed that if it does go public in a lukewarm market, there will be a far greater chance of realizing some longer term appreciation without the gut-wrenching volatility that has turned some off of the wireless sector.
A strange phenomenon at N+I was that investors seemed to forget that they have a lot of money in the big three: GE [GE], Intel [INTC] and IBM [IBM]. Rarely would people mention any of them without being asked, but they remain core holdings for the majority of investors, particularly so with investors who have followed the market through the good and the bad.
Maybe the most ironic trend at N+I, in terms of investor psychology, is the network infrastructure providers' dislike of the very companies they enable. Dotcoms are not wanted in the portfolios of the majority of investors at N+I. There are exceptions, Amazon [AMZN] and Ariba [ARBA] were the most frequently cited, but for the most part, there is a lot of fear the money might as well be laid down on a table in the casino. "ijustthoughtofaname.com is not a business model," was one of the many vehement reactions to the current state of the dotcom world.
And lest there be some sense that none at N+I has ever heard of diversification-there was even one Berkshire Hathaway [BRKA] holder among the technophiles and a smattering of other selections could be found if one looked hard enough. |
