Metcalfe's Law: Utility (i.e. demand) increasing exponentially with the growth of the number of users (Users squared). Like the telephone, it is not very useful if you are the only user, even Graham Bell found this out when he called Watson to "come here" when he spilled acid on his leg, the first "useful" telephone call. the usefulness of 2 users is 4, whereas 3 users is 9, and so on...with 150 Million cellular and handheld PDA users (like PALM etc) the utility is 22,500,000,000,000,000 or put another way, each of those 150 million users can exchange information, telephone calls, data, programs etc, with each other, a 150 Million utility for each user, rather than just being able to exchange data with 1 or 2 people. This actually FORCES DEMAND. If the customer, supplier or competition has it, USES IT, then you must get one, USE ONE too....lower prices for PALMs and HANDsprings in their price war and inventory reduction just puts more USERS out there. It does not lower demand, it exponentially adds to the USER BASE, the CRITICAL MASS INCREASES EXPONENTIALLY, even if earnings from those anticipated sales drop from a high price to a lower price, it is more than offset by the increased number of users out there gained that will generate INCREASED DEMAND. Besides, any sale is worth more than not selling the inventory at all. The ANALysts today and yesterday fail to comprehend METCALFE's LAW. Metcalfe's Law is the sucess engine that drives AOL, NETSCAPE, and every telecom out there, every computer box company, every chip company, in fact every car manufacturer, every road builder, etc etc. Now the same can be said for any network. Storage is a network service. The data stored is a USE or represents a USER of the company's products or services, and as that information increases, so does its storage, so that its retrieval can be USEFUL, so UTILITY (DEMAND) = DATA SQUARED. (Demand = Data^2). That is why I am strong into NTAP. Since reporting on NTAP as it dropped to 12 it has gone back up to 28, now it has pulled back also, but all the doomsayers, bears and ANALysts are either 6 monhs BEHIND THE CURVE or they do not see the long term curve at all. The LONG TERM IS ALL ABOUT GROWTH. The S&P average P/E dropped to 24, while the NASDAQ is still about 150, the NASDAQ was as high as a 400 P/E average. They all say this is the "bubble" and is not sustainable. They are not thinking geometrically, exponentially, they do not see MARKET GROWTH, they see only linear current market demand, current Utility or usefullness. They are not able to see the future where even machines will have heir own handheld communication devices to communicate and share and store data with each other, beyond the limits of human population growth or emerging market consumer growth numbers, they do not see MACHINE TO MACHINE DEMAND DRIVEN GROWTH AT ALL. Looking at the above numbers for handhelds of 150 Million USA USERS alone, the demand (Utility) is already here that will FORCE the increase in Users and those Users Force more demand and in the end, more units, more earnings, way beyond current linear P/E ratios, and back to higher P/E levels even higher than 400 prior high NASDAQ levels, NOT IF BUT WHEN...well it may take a couple years, but in the meantime, in the technology GROWTH sectors, every rALLY will GAIN on every sell off. There is no perfect straight linear trend line, but the line is definitely, on the mean average an exponential UPWARD GRAPH. Patent laws and copyright laws will insure this growth rate is achieved within the next 3 to 5 years, well before those very patents and copyrights expire, some 17 to 50 years range going forward. Thats the simple math....Even Bill Gates knows this with MSN DOT NET outliving the MSFT antitrust case.
I am,
Truly your$,
-Crystal Ball |
