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To: Bindusagar Reddy who wrote (11414)	11/30/1999 8:17:00 AM
From: polarisnh	Respond to of 21876

Market Commentary - 11/29/99 By Joe Battipaglia - Gruntal and Co. Weekly Perspective Last week, I raised my year-end 2,000 NASDAQ composite target to 4,300. This new target reflects the higher long-term (5year) earnings growth rate of the NASDAQ composite when compared to the S&P 500. By our estimate, the NASDAQ composite's price-to-earnings-to-growth rate is approximately equal to the S&P 500 using twelve-month forward earnings estimates (See Table 1). As of October 29, 1999, the NASDAQ traded with a price to earnings multiple 1.79 times it's estimated long term growth rate of approximately 30% while the S&P 500 traded at 1.73 times it's long term estimated growth rate of less than 14%. This suggests to me that technology valuations are not excessive given the strong, underlying growth in earnings. Since the disparity in earnings growth between the S&P and NASDAQ companies is largely the result of the NASDAQ's heavy concentration in technology, we extended our analysis to focus directly on this segment within the NASDAQ (See Table 2). Technology now represents 71% of the equity capitalization of the NASDAQ, 30% of the trailing 12-month revenue and 43% of total projected earnings. Overall, this segment tends to be more profitable and earnings growth prospects far exceed the growth of most other sectors. For many years, we have witnessed the evolution of the U.S. economy from an industrial based model to a network and information oriented model because of rapid technological innovation, globalization and deregulation. The mass acceptance of the internet has only accelerated this process. (International Data Corporation, a leading technology research organization, recently estimated that the worldwide spending on the internet economy, which includes e-commerce, IT infrastructure and business spending, will soar past the $1 trillion mark by 2001 on it's way to $3 trillion by 2003) Just as the transformation of the economy has created opportunity, so too has it challenged many of the basic rules for classifying a company's business and measuring the value of productive inputs such as intellectual property or the cost of creating these assets. This fact was evidenced by the recent restatement of GDP by the Bureau of Economic Analysis to better reflect software development costs when computing GDP statistics. Therefore, in an age where intellectual property and intangibles are often a company's most valuable productive asset, (as evidenced by Microsoft's $450 billion market capitalization) it is important that the investors fully understand the dynamics of each company's marketplace. It is no longer enough to assume that all "technology companies" will be successful at executing their business plans. Furthermore, it will become increasingly difficult to partition off technology into a separate category from the industrial economy. The recent decision to add several technology names to the list of Dow Industrials highlights this shift. The term "technology" as popularly understood should loose meaning just as the term "industrial" lost much of it's descriptive value as the industrial age evolved. Two areas of special interest include "Internet Software, Service and Content Providers" and "Telecommunication (or Internet Backbone) Infrastructure. While some fear the fallout of a burst "internet bubble", our analysis shows that Internet content and software companies account for only 7% of the overall NASDAQ market capitalization but carry expected long term growth rates approximately twice that of other rapidly growing segments within technology. As the weeks and months progress, I expect to see a continued "sorting out" of these companies based upon how well companies meet or exceed expected earnings and partner with other companies in the networked world. Companies such as Yahoo! and America Online, who have moved far ahead of the pack in terms of establishing a dominant presence are likely to continue to be successful as economies of scale emerge and barriers to entry climb in their respective businesses, in my opinion. Internet software and content providers should materially benefit from the massive, ongoing investment in network architecture by companies such as MCI Worldcom and AT&T . This build-out of broadband capability - whether through satellite, cable, optical or otherwise - enables companies such as Real Networks, Yahoo!, Macromedia and Net2Phone (in addition to the traditional telcos) to provide a broader array of Internet based services more effectively and at a lower cost while avoiding costly, direct investment in building the network backbone. Telecommunications, wireless and fiber optics equipment companies have been some of the year's best performing groups. Companies like Lucent, JDS Uniphase and Nortel have all benefited from rising investment in network infrastructure. Baring any unforeseen interruption in business spending, I expect to see strong demand, rising order backlogs and higher equity prices for these groups in the coming months. Investors should therefore remain overweighted in these areas.

To: Bindusagar Reddy who wrote (11414)	11/30/1999 9:36:00 AM
From: Clay Takaya	Read Replies (2) \| Respond to of 21876

BR, I am sure you meant Redback Networks instead of Red Hat (the guys trying to sell the free operating system). This stuff is really getting spooky. It's all looking like a house of cards and one day it's all going to crash. Clay