Good story...in Fortune..
The stocks I always liked.. if 5000 on Comp is taken out on two closing basis these will run..the fastest...
Burn, Baby, Burn: Three Stocks Heat Up
Some of Wall Street's best-known companies are really starting to sizzle. Here's why you should get in now.
Margaret Boitano
It isn't easy to find a loser tech stock these days. Most of the majors are running at warp speed--flashing by so quickly that even Captain Kirk's off-key crooning couldn't slow them down. They're moving so fast, it seems, the minute you buy one, you feel like you've missed the blastoff.
Take InfoSpace.com, the Internet infrastructure company whose shares rose a mind-boggling 1,023% last year. Even if you had waited until New Year's to buy, you still would've pocketed a 144% gain so far. In the old days, that would have been cause for Pommery Brut and Beluga. Today it's fried clams at Ho-Jo's.
The big question on everyone's mind: Is it too late to get into tech? We think not. One place to look is blue-chip companies that are reinventing themselves for the wireless age. (See our story in this issue, "The New Old Thing.") What these companies have that their flashy young cousins don't is staying power, not to mention that Old Economy relic, earnings. And many are just at the beginning of an ascent that may well turn into a prolonged run. Here, three tech companies that are just catching fire:
Motorola. It wasn't too long ago that this chip and telecom-equipment maker was a dog. Today it's a Wall Street darling. Salomon Smith Barney analyst Alex Cena recently set a 12-month price target of $200, a 15% premium over its current $174. And the company has just announced a three-for-one stock split in the form of a dividend come June, pending shareholder approval. (No-brainer there.)
To understand what's going right for Motorola today, you need to know what went wrong yesterday. In a single word: digital. Motorola clung to analog for too long. By the time the company saw its digital future, Nokia and Ericsson had already poached market share. The great digital divide wasn't the only problem. When Asian economies tanked and the semiconductor market plummeted in 1998, the stock took a bath. Then, in August of last year, the $5 billion Iridium satellite telecommunications system, which Motorola had invented, financed, and helped build, went belly up to boot. (At press time, cable czar Craig McCaw was angling to buy Iridium after floating it a $17 million debtor loan.)
CEO Chris Galvin started to lay the foundation for Motorola's upswing a year before the Iridium setback. That's when the grandson of Motorola founder Paul Galvin abolished the company's famous "warring tribes" system, which pitted internal sections against each other, in favor of a system that encourages collaboration. Today Motorola is still making up for lost time, but it's doing so at a frenetic pace. Later this month its newest digital phones will debut in the U.S. Shaped like a clamshell, they're the smallest in the world and let users do things like surf the Web and buy books from Amazon.com. And there are more wireless gadgets in the pipeline. A year ago Motorola teamed with Sun Microsystems, Lucent, and Cisco to build new wireless infrastructure capable of delivering high-speed Internet access. Don't be surprised if you see more Motorola logos in your home soon. The company just closed a $17 billion deal to purchase General Instrument Corp., the largest maker of set-top cable TV boxes. Who knows? Maybe $200 isn't high enough.
Oracle. CEO Larry Ellison is trying to put a flashy new face on what essentially is an unglamorous database management software provider. There's nothing all that new about Oracle's direction. Like everybody else, Ellison is getting into e-business. But Oracle is providing the guts--database software that enables Fortune 500 companies to keep track of their customers and suppliers. The company does have a big competitor in this new field: IBM. Still, Ellison has a leg up on Lou Gerstner. The top ten e-commerce sites already use Oracle's database products, as do nine out of the ten biggest business-to-business e-commerce sites. In fact the only B2B missing is Big Blue itself.
Oracle is also beefing up its wireless push, signing deals with 3Com to provide database software for its PalmPilots and with Motorola for its next-generation digital cell phones. "The needs of the market are just falling into Oracle's lap," says PIMCO Innovation Fund manager Dennis McKechnie, who has 2.5% of his $5.7 billion fund in Oracle.
Oracle's stock trendline over the past few years (see chart) tells the whole story. In late 1997 it tanked in large part because of Asia's currency crisis (Oracle derives 11% of its revenues from Asia); then the Y2K scare convinced U.S. businesses not to take on any big software projects. Oracle has since rebounded with Asia's recovery and corporate America's renewed appetite for information technology spending. In fact the biggest risk to the company's future prospects may be Ellison himself. The CEO has a penchant for extreme sports. He drives fast cars, pilots his own plane, and even sails an 80-foot yacht called Sayonara. Says McKechnie: "Oracle's stock would be crushed if he even falls off his boat."
Texas Instruments. Innovation is the name of the game at this $9.5-billion-a-year company. The original inventor of the computer chip used to be known for its mollusk-like pace. Now it's swimming like a shark. Last month TI unveiled two new digital signal processor chips to power the newest wireless devices. One is ten times faster than today's fastest DSP chip.
Big deal, you say? Actually, it is. You might not have noticed, but DSP chips are everywhere, powering everything from dishwashers to digital cell phones, pagers to home-security systems. We're not talking about a tiny niche market here. The DSP-chip boom was worth $4.4 billion last year, according to research firm Forward Concepts, of Tempe, Ariz.--and TI already commands the lion's share (48%) of it. That market is expected to swell to nearly $14 billion by 2003 as more powerful wireless devices debut.
Texas Instruments has already signed up the major chip buyers in the field, including Cisco, Nokia, and Ericsson. And TI isn't likely to lose its leadership position soon, says Kevin Spoor, portfolio manager of Northern Technology fund. "They're continually developing new products and working with their customers. That's a tough stranglehold to break."
TI's shares, as you might expect, are trading at a premium. At $173, the stock is up 79% so far this year. That's after having a 63% run in 1999. But money managers say it could well be a $200 stock before long. Even after comparing Texas Instruments' admittedly high trailing P/E (99) with those of its competitors--check out PMC-Sierra's multiple of 392, for example--it still looks like a surprisingly good deal. |
