Power is a top priority to e-world
By David Henry, USA TODAY
NEW YORK - At its most basic level, the medium of the Internet is the electron, and therein lies a message of opportunity for investors.
David Henry
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All of those bits of information that make up everything from e-mail to e-video and e-commerce depend on increasing amounts of electric power moving more reliably than ever before required (see chart).
The first power brownout in a major city this summer will, ironically, illuminate this reality of the virtual economy. Reminders of the growing need for reliable power will be everywhere, from personal computers to wireless phone base stations to data storage warehouses to computer server farms and the laser amplifier huts along the Internet's fiber-optic backbones. They all need power to move the bits and to run the fans and air conditioners needed to offset the heat from those moving electrons. Heat is the enemy of silicon.
You can expect frequent laments about declining maintenance of electric transmission lines in the wake of utility deregulation. And you can expect to hear money managers and Wall Street analysts talking about new investment opportunities in providers of things like UPSes, uninterruptible power supplies - basically surge protectors with batteries.
Technology consultant Mark Mills can hardly wait for the widespread recognition of what he calls ''the most critical infrastructure'' in the information economy. Companies providing equipment to switch between power sources and clean the fluctuations out of dirty current supplied by utilities ''are going to be the ascendant investments,'' he says. ''The more wired everything gets, the more people require levels of reliability measured down to milliseconds.''
Mills is co-editor of the Digital Power Report, a new newsletter started in partnership with George Gilder, the former Republican speechwriter who has become an evangelist for investments in bandwidth and what he calls the ''Telecosm.'' Gilder was early to spot the future dominance of Qualcomm's wireless technology. Now, with Mills and Peter Huber, he's extending his brand with the trademarked name ''Powercosm.''
Dick Weiss of Strong Funds says that beyond Gilder's clever marketing, he's onto something. ''This is an area where people did not appreciate the changes that have occurred as we've gone to distributed computing'' from mainframes, says Weiss, a longtime owner of UPS-maker American Power Conversion (APCC).
Emerson Electric (EMR) started picking up on the change about three years ago through its businesses that air-condition rooms of mainframes and sell power equipment. ''All of a sudden, we were providing cooling systems to rooms full of telecom equipment,'' says group Vice President Howard Lance. Emerson is acquiring related businesses and expects to garner $4.1 billion, or 26%, of revenue in the fields in 2000.
Its jobs have included Internet host sites operated by America Online, Intel and Exodus. Paul DeGroot, engineer in charge of Exodus' 20 centers worldwide, says its e-commerce tenants want to know about power supplies first and air conditioning second. An Internet firewall and physical security come later.
Exodus spends three times as much on power and air-conditioning equipment as for real estate and buildings, he says. Ditto for fiber-optic connections.
Exodus shares became hot with investors as a way to make money supplying e-commerce ventures the way Levi-Strauss made money supplying gold prospectors. Suppliers to the likes of Exodus may be the next version of that theme.
Gilder and his partners like ''pure play'' stocks of companies with no other businesses, so they won't recommend Emerson, though they admire the company. Others may find comfort in Emerson's diversity. Stocks Gilder's group has touted include American Superconductor (AMSC), IXYS (SYXI), International Rectifier (IRF) and Power-One (PWER). Beware: They recommend stocks regardless of how expensive they are. And some of these companies may get crushed as competitors move in.
Either way, it will be an electric area of the market.
Reliable power a must
The growth of the Internet infrastructure is powering the demand for more reliable pure electricity. |
