From Barrons' cover story published today:
[Fast forward to last paragraph]
So what's an investor to do?
For one thing, reset expectations. David Readerman, growth stock strategist at Thomas Weisel Partners in San Francisco, doesn't expect tech spending to return to the levels seen in 2000 until 2003. And even then, he thinks there is little chance of getting back to the average 12% growth in IT spending seen from 1995 to 2000. But stocks are acting like the recovery will come sooner. "There is a gap between analyst-modeled numbers and what the market is saying," he says.
Chang, despite his caution, has a few suggestions. Microsoft, he says, should flourish even in a weak PC environment, given its many new initiatives in areas off the desktop, such as the Xbox gaming console and PocketPC operating system for handheld computers. Chang also likes outsourcing plays, like Computer Sciences and EDS.
Readerman has plenty of picks for the long haul, based on the belief that wireless, video conferencing, distributed computing and streaming media will be important trends this year. His picks include chipmakers Analog Devices, Broadcom and Intel; Sanmina-SCI, a contract manufacturer, and KPMG Consulting. In the telecom sector, he likes Nortel Networks and Sprint PCS.
Roger McNamee, of Integral Capital Partners, in Menlo Park, California, says he's feeling "constructive" about tech stocks, though he has no great hopes for first half earnings. "It's hard to imagine the technology market just runs from here without any stumbles," he says. "December and March quarter numbers will be terrible, and June won't be any great shakes."
McNamee sees the biggest promise in consumer technology. But traditional blue chips, such as EMC, Cisco Systems and Intel are not on the list of his biggest bets. "The big guys are going to produce underwhelming growth," he says. "In the second half of the 'Nineties, you could ride the big franchises. Great stocks and great companies were synonymous. Temporarily, the linkage has been broken."
Among McNamee's current holdings are a pair of disk-drive component makes, Read-Rite and Hutchinson Technology. Those would appear to be well-informed choices, given that he's a partner in Silver Lake Partners, which owns the disk-drive maker Seagate Technology. He's also bullish on the contract manufacturer Flextronics. And his bets on the security trend are ISS and Symantec.
Mark Anderson, a hedge-fund manager and newsletter editor based in Friday Harbor, Washington, is another Microsoft fan, based on optimism about PC demand, as well as the software giant's potential in non PC-devices. As a bet on wireless, Anderson likes Vodafone and Nokia. He's also keen on Samsung, the Korean electronics giant, which he thinks can be a leader in handhelds. And he's bullish on Dell.
Merrill's Steve Milunovich, while no optimist on tech spending, also likes Dell, in anticipation of a PC upgrade cycle. In chips, he picks Maxim and Microchip Technology; as a wireless play, he's fond of Qualcomm. And in networking, Milunovich recommends Extreme Networks and Riverstone Networks.
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