You'll enjoy this Harry, I thought I stretched analogies!
from Yahoo
"Monday April 27, 3:29 pm Eastern Time
Company Press Release
"Gorillas" Trump Kings And Princes, Investors Learn At
Silicon Valley Tech Stocks Forum
MILPITAS, Calif.--(BUSINESS WIRE)--April 27, 1998--In the parlance of successful technology
investing, 300-plus individual investors Saturday learned that ''800-pound Gorillas'' are superior to
''Kings'' and it's a profitable strategy to choose the strongest swimmers riding the highest waves
among leading technology sectors.
Those messages and more were delivered at the Third Annual Informed Investors Silicon Valley
Technology Forum in Milpitas. In addition to keynote speeches by high-tech marketing guru and
author Tom Kippola and mutual fund manager Kevin Landis, attendees heard first-hand from top
executives of six diverse technology companies -- Sanmina (NASDAQ:SANM - news), Coherent
(NASDAQ:COHR - news), VISX, Inc. (NASDAQ:VISX - news), QualMark (NASDAQ:QMRK
- news), CardioGenesis (NASDAQ:CGCP - news) and CKS Group (NASDAQ:CKSG - news).
Audio tapes of the complete Forum are available for $45 plus $3.95 shipping/handling. Call
800/992-4683 or visit www.informedinvestors.com.
Kippola gave a highly informative overview of the principles discussed in ''The Gorilla Game: An
Investor's Guide To Picking Winners In High Technology'' (www.gorillagame.com) that he
co-authored with Geoffrey Moore and Paul Johnson. The book helps individual investors recognize
which companies become ''Gorillas'' in technology sectors and when the risk-reward level to buy
those stocks is favorable.
''Gorillas,'' explained Kippola, dominate their sectors because they offer the combination of
proprietary technology and high switching costs. For example, Microsoft (NASDAQ:MSFT - news)
is the gorilla among the desktop operating system providers. On the other hand, Apple
(NASDAQ:APPL - news) and IBM (NYSE:IBM - news) are ''chimps.'' Compaq (NYSE:CPQ -
news), however, is a ''King'' among PC makers. While Compaq is dominant, it still faces the risk that
a user upon upgrade might switch to Dell (NASDAQ:DELL - news) or another PC maker because
the architecture on those machines, Microsoft's operating system, is the same. This fact reduces the
cost of switching.
Contrast that, Kippola said, to the Macintosh user considering a switch to Windows. Both the
architecture and therefore the switching cost (buying new software and converting existing software)
make it less likely for users to change operating systems.
Other examples of ''Gorillas'' are Intel (NASDAQ:INTC - news) and Cisco Systems
(NASDAQ:CSCO - news). They enjoy a ''winner take all'' scenario characterized by increasing
returns as market share increases and long periods of competitive advantage. Also, they use their
dominant position to develop related businesses with existing companies.
''Kings,'' on the other hand, enjoy more short-term advantages. Unlike ''Gorillas,'' when ''Princes'' --
competitors to Kings -- cut prices, Kings have to follow suit quickly. Gorillas, however, do not. This
fundamental difference is reflected in market capitalization of these stocks, Kippola said, with Gorilla
companies valued much higher than mere Kings. All of these factors, Kippola concluded, help explain
the relationship between Silicon Valley and Wall Street and how marketing clout translates into
market capitalization.
Landis' address was more specific about stocks. As co-founder of Interactive Investments' (soon to
be called Firsthand Funds) anchor fund, Technology Value Fund, he reviewed the principles that
guide his buy/sell decisions.
''You start by find the strongest themes or trends, then focus your homework there,'' Landis said.
''The research will help you identify the strongest swimmers on the biggest wave.''
Landis cited three trends he believes hold current potential for technology investors. The first is
''better, faster, smaller, cheaper.'' These are products that do more, do them faster and better at
lower and lower prices. ''This is why you now have cheap anti-lock brakes in your car that have
more computing power than the average computer did 10 years ago,'' he said.
Two industries drive this phenomenon, Landis said. One is the process industry, i.e., those companies
that make the equipment used in making semiconductor chips, and the second is the chip design
industry. In the process industry, companies ''give you a sharper pencil each year with which to
manufacture your chip.'' Among the equipment makers Landis suggested are strategically positioned
to power this trend include KLA-Tencor (NASDAQ:KLAC - news), Applied Materials
(NASDAQ:AMAT - news), Lam Research (NASDAQ:LRCX - news) and Cymer
(NASDAQ:CYMI - news). Chip design companies are led by Avant! (NASDAQ:AVNT - news)
and Cadence Design (NYSE:CDN - news), he said.
''Those two industries are driving the chip industry and the chip industry is driving everything else,''
Landis said. ''This is a relatively safe area to bet on over the long term because everything is going to
better, faster, smaller, cheaper. Nothing is going to change that.''
The second trend, or wave, is broadband to the home, Landis said. ''Broadband to the home is
coming and if you can identify the companies that are going to be the most successful in providing that
to people, those companies are going to win big,'' Landis said.
Included in the growth of broadband is the necessity, according to Landis, to greatly increase the
bandwidth backbone. ''There's a lot of traffic that is going to go on the Internet that will make today's
bandwidth look just tiny,'' Landis said. Companies positioned to grow substantially in this area, he
said, include PMC Sierra (NASDAQ:PMCS - news), Advanced Fibre (NASDAQ:AFCC - news),
Level One (NASDAQ:LEVL - news) and Vitesse Semiconductor (NASDAQ:VTSS - news).
Landis said it is far safer for investors to invest in the growth of Internet traffic by buying stocks of
companies that build capacity and make data move more quickly than to guess which Internet
provider or search engine company will prevail as leaders.
''I don't know if it'll be Yahoo (NASDAQ:YHOO - news) Infoseek (NASDAQ:SEEK - news) or
America Online (NYSE: AOL - news) that will win over time, but it doesn't matter to me. Why bet
on an individual internet company when you can just bet on internet traffic,'' Landis said. ''We're
betting on the right chip companies that are going to win because the internet traffic is expanding. I
sleep much better at night betting on Internet traffic than on any one internet company.''
Landis said the third exciting area of investment opportunity is international wireless. The Asian
financial crisis prompted cancellation of large orders for wireless systems from Korea, Thailand and
Indonesia. But, Landis added, these orders will eventually be filled. ''When you consider half of the
world's population has never made a phone call, it's inevitable that wireless is going to grow.''
Companies Landis cited as favorably positioned over the long term to benefit from international
wireless growth include large companies Ericsson (NASDAQ:ERICY - news) and Lucent
(NYSE:LU - news), and smaller companies Celeritek (NASDAQ:CLTK - news), P-COM
(NASDAQ:PCMS - news), Anadigics (NASDAQ:ANAD - news), RF Micro Devices
(NASDAQ:RFMD - news), Alpha Industries (AMEX:AHA - news) and PowerWave Technologies
(NASDAQ:PWAV - news).
Highlights of the company presentations included:
- CKS Group -- Increase its focus on major accounts to improve
profitability. Continue to build its Internet marketing
capabilities.
- Coherent -- Use laser technologies to expand opportunities into
semiconductor chip making and DUV (Deep Ultraviolet Light)
offerings.
- QualMark -- Expand laboratory testing reach and manage growth.
- VISX -- Expand leadership position in laser vision correction
market.
- Sanmina -- Growth continuing via strong backplane business in
telecomm industry.
- CardioGenesis -- Catheter-based devices for TMR (transmyocardial
revascularization) moving through clinical trials in Europe and
U.S.
Since 1993, Sacramento-based Informed Investors has been linking investors with management of
public companies with particular strength in technology and biotechnology. Informed Investors
represents individual investors who collectively hold an estimated $2 billion in investable assets. |
