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Technology Stocks : John, Mike & Tom's Wild World of Stocks -- Ignore unavailable to you. Want to Upgrade?

To: Logain Ablar who wrote (2308)	5/2/2001 2:51:56 PM
From: John Pitera	Read Replies (1) \| Respond to of 2850

as per my note about NVDA and MSFT's XBOX being ready for developers at the E3 show in two weeks note Message 15745261 here is an article talking about game developers for the XBOX -------------- Featured Stocks Apr 18 2001 4:04PM CST Xbox: Can Microsoft Rule Gaming Hardware? by Chris Connor Senior Technology Analyst, WallStreetCity.com In the Driver's Seat After the PlayStation2's somewhat disappointing launch, the door is now wide open for Microsoft's {MSFT} Xbox to steal away significant market share away from the sequel to the best selling console ever, if Microsoft plays its cards right. The Xbox already stands a great chance of being the top dog of consoles due to the plethora of game makers developing games for the system and its industry-leading specs. The fact is that no other console can match the Xbox in either processor speed or graphics. Looking under the hood shows why. Intel {INTC} will provide a 733 MHz chip for the main processor and 3D graphics king Nvidia {NVDA} will provide a 250 MHz graphics chip. Compare those numbers with Nintendo {NTDOY} (405 MHz and 203 MHz) and Sony {SNE} (300 MHz and 147 MHz) and you can see why the Xbox could eventually reign as the top video game console. Will Image Hurt the Xbox? While Nintendo has been making consoles for over a decade and Sony was making electronic products for years before it starting making the PlayStation, this will mark the first time that MSFT has made anything even close to a console. Remember the last time Microsoft tried to dominate a non-PC consumer product? Let's just say that the company has not had overwhelming success in the PDA market (it is currently no match for Palm's {PALM) operating system). The Xbox's image will also not be helped by the fact that some people just don't like Bill Gates or Microsoft. Right or wrong, this could have a significant effect on Xbox sales; however, the biggest hurdle image-wise is the Japanese market. Out of the top four console makers (if Sega can still be counted as a console maker for the moment), only MSFT is an American company while the rest are Japanese. This is a very important point because the Japanese normally shun American electronic products and video games. If the Xbox can't breakthrough to the Japanese market, both Nintendo and Sony will have a substantial competitive advantage. A PC Console? Microsoft may have made its fortune from the PC business and the Xbox may be more like a PC than any other console (hard drive, modem, Intel processor, graphics chip from PC graphics card maker), but Microsoft has specifically stated that the Xbox will simply be a game console. That said, users won't be able to play PC games on the Xbox, which is very disappointing but makes sense given the technical difficulties of pulling it off. To further emphasize that the Xbox is strictly a game console, Xbox buyers will have to purchase a remote control kit separately if they want to watch DVDs on the console. Even worse, Microsoft is not adding a keyboard and mouse either, which means no email and online chatting. If the Xbox is going to be a major player in online gaming, it better support a keyboard and a mouse so gamers can communicate with each other. Microsoft may not want the Xbox to compete with Web TV, but the Xbox still has to be the best product that it can be. Games and Game Makers As with the PlayStation2, Electronic Arts {ERTS} will have more exposure than any other third party game developer by a wide margin. Besides Electronic Arts, most publicly-traded game makers are only working on one or two games for the Xbox (Infogrames is rumored to be in talks with Microsoft about potential Xbox games, but nothing has been announced yet). Of those other game makers, look for Activision {ATVI} to reap substantial rewards with its Tony Hawk Pro Skater 2 and THQ {THQI} to continue to enjoy success with its latest wrestling title (WWF Raw is War). Still, ERTS will generate the most attention on the Xbox (excluding Microsoft of course) with its considerable name brand and numerous titles. When the PlayStation2 launched last fall, Electronic Art's stole the show with the two best games of the launch by far, Madden 2001 and SSX; however, those two games will just be the tip of the iceberg for the Xbox. MSFT's console will get about 10 total EA games for the launch, the highly anticipated OddWorld: Munch's Oddysee (originally targeted for the PlayStation2 but the system could not handle it), several games from Sega (some will be on an exclusive basis), and the Redmond company's own crown jewel, Halo. If Halo lives up to its lofty expectations (if the multiplayer is not hampered or cancelled to meet the launch date) it could turn out to be the Mario of the Xbox - in other words, Halo could be the game that the Xbox is known for. Why is Halo so special? This game will be one of the biggest beneficiaries of Nvidia's chips by displaying jaw-dropping graphics in a highly scenic science fiction world. In addition, players will be able to drive around in SUVs, tanks, and even aircraft, which is very rare for a 3D shooter. In fact, if the multiplayer experience is handled correctly, Halo could end up being the best 3D shooter on any console period, because most console 3D shooters are no match for their PC counterparts. When it is all said and done, Microsoft needs Halo to realize its enormous potential in order to go up against the exclusive blockbusters of Nintendo and Sony like Mario, Donkey Kong, Zelda, and Gran Turismo. Stock Exposure Breakdown for the Xbox Company Ticker Xbox Games In Development Exposure Grade Electronic Arts ERTS Medal of Honor: Allied Assault, Madden NFL 2002, Nascar 2002, SSX, Knockout Kings A+ Activision ATVI Tony Hawk's Pro Skater 2 B- THQ THQI New Legends, WWF Raw is War B Take Two TTWO Grand Theft Auto 3 C Interplay IPLY The Matrix C Eidos PLC EIDSY Mad Dash C Acclaim AKLM None F 3DO THDO None F Midway MWY None F Infogrames IFGM None F

To: Logain Ablar who wrote (2308)	5/9/2001 4:40:15 PM
From: John Pitera	Respond to of 2850

HLIT update--- it may just survive. Harmonic (HLIT) 7.50 +1.61: As you can see by its chart, Harmonic used to be a trader favorite, but like many of its brethren has fallen on hard times. Harmonic sells digital and fiber optic systems for delivering video, voice and data services over cable, satellite, telco and wireless networks. However, the stock has been on a tear since late yesterday. The catalyst was the inking of a deal with Cox Communications (COX) whereby Cox will use a suite of Harmonic products to support multiple system upgrades throughout Oklahoma and Kansas. They key to the deal is that HLIT has been selected for Cox's first rollout of DWDM. HLIT investors are excited for a few reasons. It shows that its products are good enough to be used by a major cable operator which also should lead to additional business from Cox as it expands its network. This deal could spring deals with other operators. The company also recently announced that DIRECTV, a provider of digital satellite television service, will utilize Harmonic's advanced digital television systems to broadcast additional local channels next year....These news items are welcome for a company suffering from declining capital spending by its major customers causing numerous warnings from management over the past few months. The company is organized into two product divisions, Broadband Access Networks (BAN) for fiber optic systems and Convergent Systems (CS) for digital headend systems. Mgmt expects gradual improvement in its CS division while the BAN division has seen growing interest in its new architectures...While it still needs to prove itself, HLIT is attractive as a cheap broadband play that will survive. -- Robert J. Reid, Briefing.com

To: Logain Ablar who wrote (2308)	5/9/2001 10:47:38 PM
From: John Pitera	Read Replies (2) \| Respond to of 2850

ENE-- is it right to be as Bearish as OWS on ENE?? I'm not so sure but thought I'd post this anyway. Why One Firm Thinks Enron Is Running Out of Gas By Peter Eavis Senior Columnist 5/9/01 5:23 PM ET A small research boutique with a reputation for rigorous analysis is telling clients to quickly dump Enron (ENE:NYSE - news - boards), believing that the energy trading giant's 2001 earnings will fall well short of Wall Street's forecasts. Cambridge, Mass.-based Off Wall Street, led by analyst Mark Roberts, thinks Enron's 2001 earnings will fall 6 cents short of the consensus estimate of $1.79. The firm also believes Enron stock should trade around $30, nearly 50% below Wednesday's $59.20. The firm's 26-page report, published May 6, highlights Enron's declining profitability and increasing leverage and suggests that the company should trade on the same sort of multiple as a trading firm like Goldman Sachs (GS:NYSE - news - boards), which has a 2001 price-to-earnings ratio about half of Enron's 33 times. OWS also alleges that Enron's earnings quality is poor and that key parts of its financial statements are confusing and opaque. Houston-based Enron didn't comment by publication time on elements of the report that Detox sent the company. An energy analyst who is bullish on Enron's outlook says the OWS report contains fundamental misunderstandings about the energy market and Enron's business model, but he says the report does include some ground-breaking and valid insights. (The analyst's firm doesn't give stock recommendations.) Economies of Scale Why care what Off Wall Street writes, compared with, say, analysts at Merrill Lynch (MER:NYSE - news - boards)? For one, OWS has an excellent track record. Particularly sweet was 2000, when the tech stocks it had bashed came crashing down. It has also shown itself to be well ahead of the curve, recommending that clients sell e-tailer priceline.com (PCLN:Nasdaq - news - boards) in June 1999, when faith in Internet stocks was at its blindest and their prices at their most insane. Enron, with its domination of a burgeoning energy market, annual revenue of over $100 billion and impressive earnings growth, can hardly be ranked alongside the likes of priceline. But OWS thinks Enron is set for a precipitous drop nonetheless. Why? OWS's main beef is that key profitability measures are in decline. Margins on Enron's pretax operating earnings (which the company's earnings releases call IBIT, or income before interest, taxes and other items) are falling. Total IBIT of $795 million in the first quarter amounted to only 1.59% of the $50 billion in revenue for the period, compared with a 2.08% margin in the fourth quarter and 4.75% in the year-earlier period. Revenue in the first quarter was nearly quadrupled from the year-earlier period, yet IBIT rose only 27%. This shrinkage is due to lower-margin trading income making up an increasingly large share of Enron's revenue base. OWS thus calculates that for the remainder of 2001 Enron needs to generate an extra $2.1 billion in revenue for each additional penny it makes over its 2000 EPS of $1.47 to reach analysts' expectation of $1.79. The energy analyst counters that OWS apparently hasn't grasped how Enron can continue to increase earnings even when margins shrink. It does so simply by increasing volumes as the energy market balloons in size. In other words, margins may decline, but since revenues are so much higher, earnings still go up. Illustrating this, first-quarter 2001 EPS of 49 cents was 23% ahead of the year-ago figure, even though the IBIT margin shrank by 3.2 percentage points. The analyst thinks Enron will make $1.82 per share in 2001. Growing On You In addition, the huge growth in the energy market that has so helped Enron is likely to continue for several years, according to the analyst. He notes that roughly 75% of the electricity available in the U.S. still isn't traded in a market. "Eventually it will be part of a competitive environment, but it'll take five to 10 years," says the analyst. And he believes the extreme volatility in energy-related commodities that has also benefited Enron will exist for longer than OWS projects. Still, OWS's point on profitability is bolstered by other profit measures. Return on capital (net income as a percentage of equity plus debt) was 6.6% in 2000, down on 1999's 6.9% and well below the 2000 returns on capital at Duke (DUK:NYSE - news - boards) (11.8%), Dynegy (DYN:NYSE - news - boards) (12.1%) and even Goldman (8.9%). Even Enron bulls will admit that its financials are hard to follow. For example, it doesn't give a gross margin number for its wholesale services, or trading, business, which accounts for 96% of revenue. But one area of the company's financial statements registered with the Securities and Exchange Commission that consistently bugs analysts is the part that describes Enron's related party transactions, which are the deals it does with entities that have some sort of link to the firm. In fact, one of the related entities that Enron has traded with is headed by Enron's CFO, Andrew Fastow. The energy analyst comments: "Why are they doing this? It's just inappropriate." The reason for maintaining these hard-to-follow related party deals has been a source of speculation. But OWS analysis shows how a sales of optical fiber to a related party may have been used to goose earnings in the second quarter of 2000. Estimated profits from the so-called dark fiber (optical cable without the gear to send data over it) transaction allowed Enron to beat analysts' second-earnings earnings estimate by 2 cents a share, rather than missing by 2 cents. How soon before Wall Street follows Off Wall Street on Enron?

To: Logain Ablar who wrote (2308)	5/12/2001 2:41:17 PM
From: John Pitera	Read Replies (1) \| Respond to of 2850

Tim, the third response to this post Message 15790631 asks are you short the homebuilders yet? BZH, PHM, HOV that may make some sense soon, both the 10 and 30 year bond yields are over there 200 dma's now and rising and it's very possible we have seen a large H&S top in bonds and inverse H&S in Yield. we may see the steam come out of the housing market with higher rates and the second phase of the downturn, if it develops.. higher rates certainly affect housing starts and sales, and it's very possible that these homebuilders have been building up excesses, inventories, higher expenses with the boom of the past several years. Ca. money woes could contribute to this overall theme. I'm going to start paying more attention to the group.