Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : For Hedge Fund Analysts and Managers -- Ignore unavailable to you. Want to Upgrade?

To: Trader Dave who wrote (411)	12/1/2000 2:47:02 AM
From: NotNeiderhoffer	Read Replies (2) \| Respond to of 499

TD, WAHOOOO? Went to Cibar tonite with some folks you used to work with. They speak highly of you. But maybe you have changed. They never said anything about you being a WAHOOOO. newyork.citysearch.com NotgoingtowhineaboutgettingspankedagaintodayNeiderhoffer

To: Trader Dave who wrote (411)	12/1/2000 4:51:48 PM
From: Wizard	Respond to of 499

S&P 500 Technology Weighting: 10/07/98 13.7% 03/10/00 30.8% 12/01/00 21.4%

To: Trader Dave who wrote (411)	12/7/2000 2:33:57 PM
From: Wizard	Read Replies (1) \| Respond to of 499

I think this report should be framed here for the thread... This is probably the most useless 'research report' by an analyst I have ever read... 11:54am EST 6-Dec-00 Salomon Smith Barney (B. Alexander Henderson 212-816-465) Industry Outlook SALOMON SMITH BARNEY Industry Note Telecommunications Equipment Industry Outlook December 6, 2000 B. Alexander Henderson OPINION A Word Of Caution On Economic Conditions. In my opinion, the economy is slowing faster than many observers have expected. In discussions with many field contacts over the last several weeks, we get the distinct impression that economic pressures are resulting in a sharp pull back in spending and much more cautious approach to consumer spending. While we continue to believe the stocks in our coverage will exceed numbers, we think conditions are eroding quickly. Maybe its simply the reverse wealth effect resulting from a 50% decline in the NASDAQ but regardless, it looks like the fourth quarter will be a challenging one for many companies and industries. We have already seen a number of prereleases in December. They appear to be coming in earlier and in greater number than normal. Additionally, antidotal evidence suggests conditions have eroded fairly rapidly over the past several weeks leading into March. On several of the recent prerelease conference calls, comments have been made about a rapid erosion in the tone of business going into December. We suspect the quarter will end relatively softly for many technology companies. So how does this impact the companies in our Data Networking and Optical Systems coverage? Unwound Momentum. We have focused on momentum as key to our investment approach in the data networking and optical systems companies. Its clear momentum has receded sharply from the market. Tough conditions are resulting in investors leaping for cover and in a steep correction in the leadership stocks despite considerable positive surprises at most companies. The correction has been significantly amplified by the very real concerns about the health of the service providers. However, even companies positioned well against this backdrop, gaining market share and delivering substantial positive surprises, have been tarred with the same brush as those exposed. With the 50% correction in the NASDAQ from its high in March and 38% since September 1st, its not surprising the highest valuation names absorbed the biggest hit. High beta stocks rise more in up markets and decline more in down markets, there is no surprise in this observation. Expecting Less. Going forward, we suspect it will be increasingly difficult for the high visibility, high growth companies, which comprise our coverage, to produce gains commensurate with the recent past. The economic conditions are weakening sufficiently to curtail the upside. On the other hand, we think these companies will continue to, at a minimum, achieve and even exceed their forecasts, just not by as large a degree. Shifting From A Fear Driven Market To An Interest Rate Driven Market. On the other hand, its starting to look like the period of maximum pain in the technology market is already behind us. In our opinion, the change in the inflection of these names is likely driven by the perceptions of the Fed activity. Stocks are discounting a significant slow down. The markets have been hammered. Hopefully, the Fed reacts quickly enough that the wealth effect of the recent market decline doesn't give the Grinch the satisfaction of stealing more than Christmas. With the Fed indications of a shift in policy in the works, the stage may be set for a shift in the emphasis to a more optimistic set of considerations. In my opinion, we are rapidly approaching an inflection point in the psychology of the market. This will likely shift the relative importance of positive surprises over the near term. For the next several months and possibly even quarters, we suspect the markets will be bracing for earnings misses. Companies which can make their numbers will be seen more positively and the magnitude of the upside expected of perennial positive surprise companies such as Juniper, Extreme and Ciena will be more muted but more appreciated. Its likely to be a bumpy period. Volatility will likely increase. But the stronger companies should start to base and eventually rebound. It may be a little early, but we suspect the downdraft may be approaching an end. Instead of a fear driven market we may be approaching an interest rate driven market. Leadership Likely To Return To The Data Networking And Next Generation Optical Systems Companies. No doubt the recent correction in the broader market resulted in a material unwinding of the valuations of many companies in the communication sector as the market corrected the high valuation leaders corrected the most. This is not surprising given the high beta of these companies. However, as the psychology shifts back to a more positive bias, we still believe these names will be the leaders in any rebound. We think Cisco, Extreme, Ciena, and Nortel will lead the market when the market rebounds. Calling the bottom is treacherous, but with the Fed poised to start easing, the cash built up on the sidelines, and the sentiment as negative as its been in years, we may be close.