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

To: Seldom_Blue who wrote (40045)	3/7/2001 2:08:51 AM
From: lurqer	Respond to of 54805

Of course they are in different markets. Hmm... Bruce is the authority here, but IMO less so than you might think. Recent moves have resulted in some turf encroachment. lurqer

To: Seldom_Blue who wrote (40045)	3/7/2001 3:56:30 AM
From: Bruce Brown	Read Replies (1) \| Respond to of 54805

First, a little recap: If we study the entire application software as well as the B2B software industry groups, I think it is fair to point out that no man has been an island in the share price/valuation correction on a technical basis to account for the fundamentals (of which has remained 'uncertain'). Pop in some ticker symbols here at SI and do a chart using Oracle, i2, Siebel, Ariba, Checkpoint, PeopleSoft, Veritas, BEA Systems, Agile, etc... to see how they all pretty much track each other and move as a group over various time periods. Oracle's March 1 warning continued to get the ball rolling in terms of worries, uncertainties and more selling pressure. Volumes increased to the downside as shares were sold in all of the issues. Whether one views it as a 'technical' sell off or a 'fundamental' sell off - the two were in union. As recently as mid February, we had companies like Oracle and Siebel's management saying things were tracking fine for their quarters. Oracle's announcement and some of the analyst comments before that announcement pointed out concern that the majority of application software vendors book a healthy majority of their revenues in the final days of the quarter. This makes their business models heavily back end loaded. Oracle's warning mentioned that as late as Friday, February 23rd - 4 business days before the end their Q, things were on track to meet the numbers. However, the next three days didn't pan out to make that come true as order and deals were deferred. This news quickly translated to all the other software companies who are on a different fiscal year. Their quarters are March ending. This translated to fears, worries, uncertainties that if Oracle said things were okay up until those last few days and then didn't make the numbers, this could possibly happen as well in Siebel, i2, Checkpoint, Veritas (who announced yesterday they were tracking just fine), PeopleSoft, BEA Systems, Ariba, CommerceOne, Purchase Pro and right on down the line. In other words, the market has been pricing in the 'expectation' that we will hear warnings and adjusted numbers for these companies because we have seen pretty much the same thing in all other areas of technology. Not a fun situation to watch unfold, but that is reality. Segment after segment of the techology sector. Don't get me wrong, warnings and valuation adjustment has been going on outside of the technology sector as well on other exchanges. So your question of do I think the fundamentals have changed in this environment were hopefully addressed above. It's more important what the 'market' tells us in terms of what it 'thinks' - and it has been 'thinking' and 'telling us'. All we can look for is a point where things stop going down and a base is built where eventually news from the technology companies begins to show that things on the fundamental side are improving. In terms of the Nike news, I have posted on some of the i2 boards my comments in regards to that. Nike is one of i2's thousands of customers. The implemenation of these solutions for SCM are complex. It's not a shrink-wrap install and 'see you later, enjoy the software' sort of a deal. There is a consulting/maintenance firm involved. There is employee training and education involved on how to make the transition to the solution. There is a team from i2 involved. Somebody in the entire transition team group effort - be it Nike, i2 or the consulting firm did not address all the issues involved in making the transition. Will we ever know the exact details of this one implementation? I don't know. In the Nike press release, they stated that the problems and been addressed and things were now stable and they would not be changing their solution from the i2 SCM system. So, in effect, the news release was 'old news'. The timing happened to be correlated with the entire above scenario of a major sell of in the entire software group. I haven't done any study on the shoe and fashion apparel industry to know enough if Nike is in an isolated slow down of revenues or if the entire thing really was due to the software solution failing to execute properly during the transition. Regardless, everyone is looking for a blame these days. Notice the number of class action lawsuits being filed (including one in regards to i2) these days as the 'reality' of the economic slow down and perceived 'button down the hatches' has built a brick wall around IT spend. In the regards that the issue has been addressed and was addressed to make the system stable and continue on with the transition at Nike before the press release of their EPS being effected, I don't take it as 'big news' because it is well known that this installations and implementations are not 'trouble free' and require a complex coming together of factors. If, on the other hand, there was a high percentage of those thousands of i2 customers having similar reports and transition problems, then the red flag should be raised that the catch 22 problem of taking on more customers for growth than the service and transition team can handle has gotten out of hand. Both Siebel and i2's management teams have addressed those issues in conference calls over the past three or so quarters. I like i2 and I like Ariba. The target separate niches even though there is some overlap. The barriers to entry for these complex solutions from i2 and their value chain continue to strengthen their gorilla position. Unfortunately, the valuations for the entire sector - as well as all technology sectors - has been undergoing a very healthy diet. BB