A Time for Trimming, but Not for Dumping
By Jim Seymour
Special to TheStreet.com
3/30/00 7:03 PM ET
Am I the only one around here old enough to remember Sanford and Son, the
1972 sitcom starring Redd Foxx, a comic previously best-known for his blue
language, as the owner of a small junkyard? (You may also remember supporting
actor Freddie Prinze, who shot to brief stardom during the series with his
all-purpose line, "Eees no' my chob!")
Foxx drew the biggest laughs when, in the face of even the smallest perturbation,
he would clutch his chest, stagger, look heavenward and call out, "Oh, this is the
big one! This is the big one! I'm comin', Momma!"
I heard Redd Foxx's voice in many of your emails this week. Investors are
obviously worried that tech has folded its tent and that the Nasdaq ain't comin'
back, Momma.
My analysis: End-of-quarter window dressing; stock prices that had gotten a little
beyond themselves; and the legendary nervousness of the individual investor, now
the backbone of the Nazzdog.
Three days in, with the Nasdaq trading down 600 points since its March 10 high
of 5048, it's hard to be serene, especially if your holdings are concentrated in
some of the real disaster areas along the path of this tornado: Internet Capital
Group (ICGE:Nasdaq - news - boards), down to 96 from a beginning-of-year 176;
Akamai (AKAM:Nasdaq - news - boards), down from 327 on New Year's Eve to
the mid-160s today. You don't have to go back that far: I can remember lots of
stocks trading 25% or more higher than their Wednesday closes just a few
weeks ago. How about StarMedia (STRM:Nasdaq - news - boards), down 40%
this month? Or Citrix (CTXS:Nasdaq - news - boards), down today alone about
16%, for no discernible reason?
Sure, that's pain. Lots of it. I've got a lot of that stuff on my own books. Lobster
Boy, I feel your pain.
But is it -- pardon me, Redd -- the Big One?
No. This was a predictable correction, launched by Abby Joseph Cohen two
days ago, reinforced by a misquoted Mark Mobius yesterday and forecast, for
God's sake, by half the seers on Wall Street.
Anyone who didn't expect greater-than-usual market volatility in New Economy
tech stocks must have been living under a rock for the past couple of years. That
comes with the turf and it's not going to change.
The price of reward is always risk, and the rewards delivered by the huge gains in
tech stocks since the first of the year seem to me well worth the price we've paid.
If you chose wisely, you're still doing very, very well: Exodus (EXDS:Nasdaq -
news - boards) is down 5% today, to 144, after trading as high as 169 just a
week or so ago ... but it was trading under 100 at the beginning of the year. Nice
gain. Or InfoSpace (INSP:Nasdaq - news - boards), down by half since earlier
this month, but in the teens (split-adjusted) last fall. Another nice gain, indeed.
You've gotta hold on during all this trash-talking. I'm using the sag as a reminder
to clear out the dead wood, to lock in profits (yes, smaller profits than I had a
month ago), to refocus, perhaps only temporarily, on some big-money tech
stocks.
I don't want to sound like Annie, belting out "Tomorrow! Tomorrow!," but you and I
know this is going to pass, and at year-end, the big winners are going to be the
investors who held on to the good stuff.
You only thought you were tired of the Microsoft (MSFT:Nasdaq - news - boards)
soap opera before, eh? Expect an incredible frenzy next week, leading up to the
April 7 drop-dead deadline from U.S. District Judge Thomas Penfield Jackson.
If there's no negotiated settlement in place by then, he'll release his long-awaited
Conclusions of Law findings in the Microsoft vs. Department of Justice antitrust
action.
And we all expect that to be rough on Microsoft, so rough that if only for political,
face-saving reasons, the Justice team and its state attorneys-general partners
would be most unlikely to enter into any settlement that did not deliver Bill
Gates' head on a silver platter.
I said here the other day, looking at the rumored terms of the Microsoft
settlement offer from last week, that Big Redmond had included some
throwaway, no-cost, obvious items, including unbundling Internet Explorer from
subsequent versions of Windows.
It occurred to me this morning that I was a little glib there, because one of the
nice features of the upcoming release of Windows ME, or Millennium Edition,
due on the market in about three months as a replacement for Windows 98, is
closer integration between the operating system and that browser.
If the front office gives up on bundling, what will the Windows ME team do?
Unstitch the OS-browser integration? Leave the hooks in place, but ship the
products separately?
I can do just fine, thanks, as a PC user without any closer integration of the two
than I have at present in Windows 98 and Windows 2000 ... but I'd like to have
the two linked more closely.
My guess is that close integration will go by the wayside, a cost of getting a deal
done.
One last Microsoft-DOJ point: I hear that Steve Ballmer's clear expression that
Microsoft has now decided it really wants to reach a negotiated settlement has
stiffened the backs of the Justice and state attorneys general people, which is,
perversely, making it harder, not easier, to find common ground this week.
Well, one more: The structured path to a settlement laid out two days ago by
mediator Richard Posner, Chief Judge of the U.S. Court of Appeals in Chicago,
has won no friends on either side, I'm told.
But it's the kind of jam-it-through mediation style that has become popular in
recent years: Lay out a schedule for a prescribed series of offers and
counteroffers, with closely spaced dates for each round, and make clear that on
a certain date there will be a deal ... or all bets are off.
Tough, indeed. But then, Posner has shown he's a tough judge.
My current guess: We'll see a deal late next week.
Jim Seymour is president of Seymour Group, an information-strategies
consulting firm working with corporate clients in the U.S., Europe and Asia, and a
longtime columnist for PC Magazine. Under no circumstances does the
information in this column represent a recommendation to buy or sell stocks. At
time of publication, Seymour was long Exodus, Internet Capital Group and
StarMedia although positions can change at any time. Seymour does not write
about companies that are, or have been recently, consulting clients of Seymour
Group. |
