Dear Greg: "Whatever happened to Milunovich at ML?"
He got promoted. Maybe Bob Kim knows the hows and whys, but from my position (absolutely zero level of inner ML workings knowledge), I'd say Steve was able to set himself apart from the other ML analysts by getting hooked on Christensen's _The Innovator's Dilemma_, flinging around _Gorilla Game_ lingo, and talking-up Gilder. Basically, Steve took non-traditional ways of analyzing stocks that in a bull market sounded great and refreshing--and got promoted. NTAP was the perfect kind of company for the models he was using.
Let's see this time next year how his projections for 2001 fare. He and John Roy made these on Jan.2 '01:
Technology Predictions for the New Year
Reason for Report: Prognostication
These are our 15 Insights or big picture predictions for technology in 2001:
1. Tech stocks should struggle in the first half but could rebound in the
second.
2. Storage and photonics should be standout sectors.
3. Hot product areas should be handhelds, SANs, e-commerce, and wireless;
strong vendors include Microsoft, Cisco, Compaq, NetApp, Sun, and EMC.
4. Investors will put tech money to work more globally.
5. Small cap tech will outperform the small cap universe and perform better
relative to large cap tech.
6. Tech investors will be increasingly frustrated by GAAP accounting.
7. IPO proceeds and M&A deal value could decline by 30% or more.
8. Venture capital funds raised and committed could fall by as much as half.
9. Deploying will be more important than developing new technologies.
10. Peer-to-peer applications will begin rolling out at leading corporations.
11. Gigabit Ethernet will take the networking world by storm.
12. Always-on will boost 2.5G wireless adoption while 3G slips.
13. Entertainment will be increasingly interactive and online.
14. Users will pay more attention to the personalization and filtering of content.
15. “Trust” and “privacy” become more than buzzwords.
(Continued)
Insight #1: Tech stocks should struggle in the first half
but could rebound in the second.
Although we are looking for a tech rally in January given
oversold conditions and money on the sidelines, the glory
days are unlikely to return. Fundamentals are likely to be
disappointing through at least the first half. The economy
is slowing, and tech spending is half of capital spending.
Tech profit growth could slide to 10% in 2001 from 32%
in 2000 with corporate tech spending up 16% versus 26%
in 2000. Valuations have fallen by two-thirds but are not
at historically low levels. The market value of tech stocks
relative to their GDP contribution is still more than two
times the 1981-96 range. Credit problems such as vendor
financing could create further downside.
The news should improve in the second half as likely Fed
rate cuts begin to affect the economy and earnings
momentum improves on easy comparisons. The Internet
infrastructure build out should continue in all but the worst
circumstances. Although the fundamentals might not
really pick up until 2002, the stocks should anticipate
improvement in the second half. Unfortunately, excesses
following tech’s more than 400% appreciation from
October 1998-March 2000 will take time to be worked off.
Insight #2: Storage and photonics should be standout
sectors.
Although valuations for optical and storage stocks are
high, we think the fundamentals will justify investor
optimism, especially in the second half. We don’t see a
bandwidth glut because new applications, such as rich
media, will fill the available bandwidth. Despite slower
carrier spending overall, our analysts project optical
transport equipment sales growth of 40%. In fact, optics
could rise from 20% of carrier equipment spending today
to 50% in a few years. Important 2001 developments
should include the emergence of second-generation
components and beta tests of all-optical networks.
We’ve been bullish on storage ever since our surveys
indicated that storage was becoming a separate purchase
decision and being centralized. The move to networked
storage should benefit both SAN and NAS. The boost in
bandwidth should directly benefit storage. Not only will
corporate information boom with rich media becoming
more important, but personal data (e.g., medical records)
should contribute to storage revenue growth of at least
35%. We prefer focused storage players.
Insight 3: Hot product areas should be handhelds,
SANs, e-commerce, and wireless; strong vendors
include Microsoft, Cisco, Compaq, NetApp, Sun Micro,
and EMC.
Our latest TechStrat Survey provides a glimpse of buying
trends in 2001. The highest-ranked product areas by
spending growth are: (1) handhelds, (2) SANs, (3) e-commerce
software, (4) wireless products, (5) databases,
and (6) servers. These results suggest continued buildout
of Internet infrastructure with wireless appliances gaining
importance. The softest areas were (1) ATM/SONET
equipment, (2) mainframe hardware and software,
(3) business intelligence software, and (4) consultants.
We similarly asked about buying intentions by vendor.
Companies at the top of the heap were: (1) Microsoft,
(2) Cisco, (3) Compaq, (4) Network Appliance, (5) Sun,
and (6) EMC. It appears that Windows 2000 adoption will
improve and that Microsoft will make headway in server
software. Vendors posting weaker interest were IBM,
Lucent, and Hewlett-Packard.
[snip to end]
Lynn |
