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Technology Stocks : Broadcom (BRCM)

BRCM 54.67

0.0%

Feb 9 4:00 PM EST

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To: Stoctrash who wrote (5900)	4/30/2001 1:57:03 AM
From: Rob S.	of 6531

I think it is much more dramatic from a sector perspective but is more cushioned by a favorable macro economic climate. There is no question about the fact that the PC revolution had caught a lot of the "establishment" in the computer industry and on Wall Street completely off guard (laughing at the starched white shirt establishment clowns who "just didn't get it" is what made it so damn fun!). But they grew to accept and love it. And the industry rewarded their love with huge piles of money. I mean HUGE piles of money. More millionaires were created than at any time in the history of the world. Since the PC revolution Wall Street has gone looking for the "Next Big Thing" they could climb aboard. In place of reluctant guys and gals who didn't get it the attitude had shifted to taking a swing at almost anything that was hot at the moment as long as everyone else you knew thought so. As the PC revolution began to fade those huge piles of money wanted to find somewhere as exciting to jump. The Street really didn't understand what technology meant to the process but that didn't prevent them from getting excited again and again. So when the Internet came along and the macro economic picture was one of a grand new rise of world capitalism nobody wanted to wait for the thing to prove itself. They no longer asked the hard questions they had asked in the early days of the PC revolution. The Bill Gates and Steve Jobs of the Internet craze were not met with the same skepticism: "what is this thing good for?" "Why would I want to do a spreadsheet on this little screen when I can lay out papers all over the place?" "Do you really think this will become more than a techie hobbyist’s toy?" "You got to be kidding me if you think you'll make a REAL business out of this!" - ex IBM CEO! ; ^). Instead the attitude of analysts was to laud companies like Amazon.bomb with miraculous expectations (I participated in the early ccs and even did my own business plan - but I was too dumb to catch the frenzy on the way up and get rich quick before the inevitable crash. My B.P. just didn't add up to profits with all those highly paid workers in the pro-formas). I remember an ANALyst telling me that Amazon’s model would practically devastate the old world retail model because they “don’t have to have brick and mortar buildings and warehouses – people just order off the Internet and the computers send it to a fulfillment company to be shipped out. Amazon’s costs will be so low the traditional companies won’t have a chance.” So when the Internet came along there was a huge pile of money ready to jump into action with little else than a glee in the eye of the investor and the greed of picking people’s pocket in the eyes of the ANAlysts (Those fool ANALysts Henry Blodgett and Mary Meeker reportedly made about $14 million each last year) Greed may be good but greed without sharp critical thinking ends in disaster. And this was a disaster of a monumental scale primed to happen. The crash of the Internet "new Economy" and the telecommunications capital spending that was tied to it (also due to deregulation but that's another story) was inevitable because so many of the businesses built upon it had exceedingly faulty basic business premises to begin with. Why didn’t Cisco, Lucent, Nortel, and the chip and other component companies that fed them see this coming? Either they did and it was a reality that worked against “maximizing my personal net worth” or they and the MBAs they employed were so caught up in the fantasy that they truly were doped into being oblivious. (I’m not knocking MBAs per se . . . I’m one of them). In retrospect it is easy to poke fun but I was saying it was nuts three years ago. The Internet is a real thing and has delivered some dramatic benefits to business individuals. It is a “revolution”. But although the exact nature of it was not foreseen, the maturing of the passing of the baton from the computer age to the communications age was long anticipated. Ask a simple question and get a book. Anyway, this downturn is likely to be more protracted than many now think. The big engines of the bubble are not going to come back nearly as strongly as before. Large industries, such as telecomm will take two or three years to “rationalize their debt positions”. And valuations of the average tech company is still high on an historical basis. Maybe we will see a bottoming out of most companies by the end of summer or maybe it will take even longer than I realize.

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