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Technology Stocks : George Gilder - Forbes ASAP -- Ignore unavailable to you. Want to Upgrade?

To: Dan B. who wrote (4156)	5/9/2000 2:08:00 PM
From: OWN STOCK	Read Replies (1) \| Respond to of 5853

More like, if GG said they did, good enough? Look, I don't have the time to go over business 101, but some of the things to look for when deciding to start a company, go work for one, or invest in one are: 1) Do they have a product people want to buy? In AVNX case, the answer is yes. 2) Can they make it at a price people want to buy it for? In the case of AVNX, the answer is yes, for now. 3) How much business can they do, and how long can they do it? In the case of AVNX, this is competition and technology limited, as the market is growing so fast...the telespasm thing... See this affects the PE ratio the company can justify...sort of, the high PEs telecomm companies get is a direct result of the belief that they will receive future earnings which are huge...and these are the result of huge market demand, AND lack of competition. So we all believe the market is exploding...so demand is not the issue, but competition and obsolescence is. NOTE: This is the VERY thing that has killed a number of GGs touted companies in the past. Someone else came along with a better mousetrap, and very quickly too. See, this is the KEY issue: you need to have a HIGH BARRIER to competition also. And patents help, but it is mostly (IMO) making a product that is VERY hard to make. Think of it this way: how much would you have to pay someone to walk nextdoor for a cup of sugar versus how much to scale K2 and plant a flag? Now if your business is planting flags on mountains, and it turns out for telespasm reasons this is what needs to be done, then you are going to be very rich and for a long time (probably). The guy who walks next door for sugar is still in business, but is not making much money 'cause it turns out a new crop of immigrants just arrived, and they do it for almost nothing. So now let's look at AVNX. Their product has almost all labor in its COGS (Cost of Goods Sold). So how hard would it be to go offshore and beat their Silicon Valley costs? Not hard, and they know it, that's why they talk about their PRC connection. They think that protects them from that problem. Well, in one may it MIGHT, and in a fundamental way it doesn't. They are in the cup of sugar business, not the K2 business. Bottom line, your business has to be HARD, not easy....lot's of capital equipment, not labor....high technology, not low... Now add the FACT that a technological halflife is about nine months these days, and see how you want to structure your investments.... I could ramble more, but time moves on.... -Own