Oracle vs i2/Siebel
With Tech Stocks Falling,
A Short Slide Isn't So Bad
By Ken Brown
Staff Reporter of The Wall Street Journal
It's all relative.
When the Nasdaq Stock Market opened Thursday, traders' screens showed more red than the climax of a bad slasher movie. But Dennis McKechnie, manager of Pimco Innovation fund, was upbeat, even as his $5 billion fund had already lost 3% of its value.
"We had a great open," he said.
How's that?
Because the technology indexes were plunging far more than his fund, the 35-year-old Mr. McKechnie figured the fund was probably well ahead -- meaning it was losing less -- than his competitors. "We're outperforming [the Standard & Poor's Technology Index] by 1.3 percentage points -- that's huge. The open was wonderful," he crowed early in the day. The fund finished the day with a loss of 2.22%, compared with a fall of 4.71% for the index.
...
Despite his upbeat demeanor, Mr. McKechnie has hunkered down for the duration. He sells off at least a portion of any holding at the first inkling of bad news and usually regrets not selling more. "Your first sale is always your best sale in a bear market," he said.
Thursday, he was selling Siebel Systems Inc., which makes software to help businesses manage their relationships with customers and was once the fund's biggest position. He sold after learning that Oracle Corp. was replacing i2 Technologies Inc., which makes supply-chain management software, as a supplier to Motorola Inc.
The connection? He believes Oracle is aggressively trying to take business from Siebel and i2, and if it is succeeding with i2, it must also be succeeding with Siebel, Mr. McKechnie surmised.
"It's a more nuanced view, more connect the dots," he said. So he sold a third of his shares of the stock, which finished Thursday at $69.88, off $1.88, on Nasdaq. "In a market that goes drub, drub, drub, you're better off throwing the whole thing out," he said. (David Schmaier, senior vice president of products at Siebel, disputed Mr. McKechnie's view. "This inference is not true. In fact, for us, the market for CRM [customer relationship management] software has never been stronger," he said.)
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