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Strategies & Market Trends : VOLTAIRE'S PORCH-MODERATED -- Ignore unavailable to you. Want to Upgrade?

To: SOROS who wrote (37136)	5/22/2001 9:49:32 AM
From: SOROS	Read Replies (1) \| Respond to of 65232

Backing out the bubble Plus: Bluelight goes home? And: Ray Lane interview By Bambi Francisco, CBS.MarketWatch.com Last Update: 2:54 AM ET May 22, 2001 SAN FRANCISCO (CBS.MW) -- The Internet bubble is like froth that needs to be scraped off the cappuccino. And even with the year-long collapse, Goldman Sachs still sees some residue. Translation: Caution! Tech stocks look expensive. This is the conclusion drawn by a Goldman Sachs tech team that went through the exercise of quantifying the "bubble;" the inflated tech spending; the froth on top. The team estimated the revenue generated on, as we now know, a delusory foundation: Dot-coms, whose only raison d'etre was to exist in a bull market, and traditional firms, whose spending was less strategic and long-term in nature than reactive and experimental. Lavish spending on software, servers, routers, storage, Internet advertising and Web consulting services created these one-time revenue streams that everyone blindly concluded could only go higher. This revenue rang up about $1 out of every $5 in technology spending, or 20 percent of tech revenue generated between 1998 and 2000, according to the Goldman study. In effect, this inflated revenue became the platform on which analysts began to extrapolate, creating the inflated future sales and earnings expectations that have been continually revisited and slashed ever since the peak in March 2000. If Goldman's high-level conclusions are correct, there is likely more slashing to be done. The reason for this dour assessment is that the economic slowdown has clouded the true impact of the so-called "Internet bubble." "There is a sense that investors believe the fall-off in revenue and earnings has more to do with the economic slowdown rather than the actual inflated spending by brick-and-mortar companies," said Tom Berquist, an analyst at Goldman Sachs who contributed to the report. Watch interview with Tom Berquist of Goldman Sachs. The amount of corporate spending that is considered excessive and therefore will not be returning is "actually larger than investors think," said Berquist. The report looked at 37 top-tier tech companies, including Siebel Systems (SEBL: news, msgs, alerts) , Oracle (ORCL: news, msgs, alerts) , I2 Technologies (ITWO: news, msgs, alerts) , BEA Systems (BEAS: news, msgs, alerts) , Check Point Software (CHKP: news, msgs, alerts) and Microsoft (MSFT: news, msgs, alerts) . Bottom line: When the economy does begin to finally perk up, the sales and earnings the market expects may prove as ephemeral as cappuccino froth.