**OT** Robbie Stephens Conference: Sterling Gets Some Respect
By TSC Staff
2/23/99 10:10 AM ET
SAN FRANCISCO -- E-commerce software company Sterling Commerce (SE:NYSE) looks sterling to most investors at the BancBoston Robertson Stephens Tech '99 Conference, nearly filling a Ritz-Carlton ballroom at its presentation Monday.
Investors eager to participate in the Internet craze, but not so eager to pay the lofty valuations of something like an Amazon.com (AMZN:Nasdaq), are finding Sterling particularly attractive because its stock tumbled earlier this month to the lowest level since October. The stock drop was due to weaker-than-expected software growth in the first quarter.
The idea of an Internet stock that may be reasonably valued proved tempting to many investors. "It's an interesting company," said one fund manager who doesn't currently hold the stock, but who came to see if it might be worthwhile to grab some.
What's so interesting? Sterling CFO Steven Shiflet said he's comfortable with Wall Street estimates of 35% to 36% revenue growth this year. Shiflet expects Sterling will maintain its 33% to 34% operating margins this year. He also emphasized huge growth in markets outside the U.S., saying that 21% of last year's revenue came from international sales.
But there is one point that could tarnish Sterling's bullishness, some investors cautioned. "The company has a very high amount of capitalization of development costs," one Midwest-based fund manager said.
Rather than expensing software development costs as many software companies do, Sterling accounts for the costs as an asset on the balance sheet and aggressively amortizes them over time. That helps keep margins high and supports earnings, fund managers said.
-- Medora Lee
Tailgate Entrepreneurship
Anticipation is mounting for Intel's (INTC:Nasdaq) Merced chip for servers, a chip that will run on a revolutionary 64-bit architecture. But Intel expects the current 32-bit architecture to dominate the PC world for the foreseeable future.
That's one nugget of information that Mike Aymar, vice president and director of Intel's platform launch division, gave money managers at a packed presentation at the BancBoston conference that largely recapped last Wednesday's Pentium III press launch.
Aymar told fund managers that Pentium III-based computers will hit store shelves Friday. But the chip giant has been shipping P-3s to computer makers for two months, and savvy and overeager Intel fans have been able to get them from unauthorized channels.
This led BancBoston analyst Dan Niles to joke to fund managers that for those who couldn't wait until Friday to buy their new P-3 based system, he'd be selling the systems out of the back of his car after the conference.
-- Marcy Burstiner
TI Strengthens DSP Line
Texas Instruments (TXN:Nasdaq) has developed a new digital signal processor that doubles the speed of printers and will work across product lines, John Scarisbrick, senior vice president for finance, told money managers at the Tech '99 conference.
The "xStream DSP" enables printers to print big jobs in seconds as opposed to minutes, he said. It is initially targeted to fit into business printers that sell for $2,000 and up. But TI hopes eventually to sell the chip for every printer made.
There is no similar chip on the horizon, Scarisbrick said. He offered up the xStream as the latest in a line of new DSPs from TI that will help it solidify and lengthen its growing lead in the DSP market. TI, Scarisbrick said, now commands a market share that exceeds its top two competitors combined.
-- Marcy Burstiner
Hyperion's Titanic Clash
Some money managers were hoping Hyperion Solutions (HYSL:Nasdaq) had finally gotten back on track after reporting a weak second quarter in January that pushed the stock down to the lowest level since October.
But Edward Hemmelgarn, portfolio manager at Shaker Investments, attended the enterprise software company's breakout session and said the company did not show any signs of rebounding for at least two or three quarters. He said integrating the businesses of Hyperion and Arbor Software still needed time. Hyperion closed its merger with Arbor in August, but talk that the two companies are having major corporate clashes has dogged Hyperion stock. HYSL is down 55% since early December.
But Hemmelgarn will keep an eye on Hyperion, saying that once it's over this hump, it could still eventually emerge as a winner in the software race.
-- Medora Lee
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