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Strategies & Market Trends : Gorilla and King Portfolio Candidates -- Ignore unavailable to you. Want to Upgrade?

To: Grantcw who wrote (25526)	5/29/2000 7:43:00 PM
From: Thomas Mercer-Hursh	Respond to of 54805

I have sold off some gorilla positions when I thought that the market capitalization of the company was becoming a sizable percentage of the overall market the gorilla was projected to dominate Err, by definition a gorilla has dominant market share. Does this mean that you are selling off companies just at the point where they become gorillas? If what you want to do is ride the tornado to get the big gains, you are certainly entitled to do so, but you may be missing out of a lot of relatively low risk continued growth. Look at a MSFT or ORCL as companies who have had a strongly dominant market share for a long time, but have (or had) continued to grow strongly for long after that. To be sure, if a company gets a dominant market position in a very specific market and, in particular, if they strongly dominate new systems sales, then one might expect their rate of growth to slow, unless the market itself was continuing to expand, e.g., PCs. But, even if the original market isn't growing, a gorilla can exploit its position to create new tornados and new markets for continuing growth. There are lots of examples of shiny pebbles with great ideas who fail to develop a tornado for a variety of reasons. Similarly, PSFT is an example of a company that seemed to do the right things to create and climb a tornado with HR, but then couldn't figure out what to do once they got to the top. One of the points that Moore makes over and over again throughout his books is that change in status in the TALC requires a change in tactics and orientation, possibly almost the reverse of the one in the prior stage, e.g., when crossing the chasm. Lots of companies do one part right and then fail to make the adjustment.

To: Grantcw who wrote (25526)	5/29/2000 9:49:00 PM
From: Mike Buckley	Respond to of 54805

CW, I think one of the big differences between PeopleSoft and many of the other Gorillas we follow here isn't just the size of the market but is also that it is an apps provider with a smaller market. Regardless of how effective an apps Gorilla is, some of the business will be won by competitors of a larger scope selling related but different products. In the case of PeopleSoft, they tried to combat that problem by becoming an ERP player of sorts. It's a problem that I believe should be carefully watched for all apps Gorillas. While I would generally be inclined to sell all of my position in an enabling Gorilla only under proven threat of innovative substitution, I might sell all the stock in an apps Gorilla for other reasons. PeopleSoft would be an example of why I might do that. --Mike Buckley