From MSN
--
Posted 7/2/2001
SNS Tech Trends
--------------------------------------------------------------------------------
Mark Anderson is president of Technology Alliance Partners, and of the Strategic News Service.
SNS Tech Trends
5 don'ts for technology investors
In a 'you should' world, here's a 'you shouldn't' strategy that will make you glad you resisted your impulses. Also, Compaq's new old strategy.
By Mark Anderson
The world is so unbalanced right now that many folks are looking at the wrong measures to ascertain what to do next with their investment strategy. Although I would be the last to suggest what folks should do, I find it pretty easy to suggest a few things that they should not. Here they are:
Don't repeat last year's mistakes. A USA Today report last week indicated that almost all of the recent Nasdaq ($COMPX) gains came in companies that were small caps that made no profits. Please go stand in front of a mirror and repeat after me: I have learned, I have learned, I have learned …
Don't invest based on broad measures like the Nasdaq; they have no real meaning. Last week Goldman Sachs devastated the markets by coming out with downgrades on over 30 stocks. About 20 minutes later, a reader sent me an e-mail on their downgrade, with the heading: Does Not Include Microsoft (MSFT, news, msgs), Dell Computer (DELL, news, msgs), Nokia (NOK, news, msgs) or Intel (INTC, news, msgs) -- all stocks we picked as likely to rebound as we emerge from the past year’s tunnel.
Don't go for the hot new thing. While exciting new technology is always worth investigating, so many companies are just scrambling for their lives, this is a good time to seek value in companies that you know and believe in, understanding how and why they will prosper from a competitive point of view in this rough marketplace.
Don't not go. It is easy to wait, and there are definitely those who should. But, for those who are willing to take the additional risk of investing in the current technology markets, prices will probably not be better anytime soon.
Don’t try to time the market. The stats are in, and all those brilliant friends we all had who made major bucks every morning before their third coffee -- it turns out that most of them are now broke.
Take a great lesson, realize that timing the market is a fool's game, and pick really great companies that will come out of this period with increased strategic positioning and competitive strength. Invest in them prudently, hold on to them, and be glad you did in a few years, when the prices of today will seem like a lost dream. (Editor’s note: Microsoft publishes MSN MoneyCentral.)
Name that strategy
When Compaq founder Rod Canion and friends sat down around that fateful napkin, they drew what became a 27-pound "luggable" computer, based on the IBM PC. Last week, Compaq Computer (CPQ, news, msgs) decided to copy IBM (IBM, news, msgs) again, in a sudden lurch into software and services. These arenas offer the bizarre attraction of having decent margins. Only one problem: In this case, the company is going full circle back to a place it was running from not so long ago.
Sophisticated (i.e., older) readers remember when Compaq purchased Digital Equipment Corp. years ago, with the promise of taking a PC company and adding the High End: minicomputers (servers), consultative selling, big-ticket invoices, long-term contracts and the Alpha chip. Last week, in a separate announcement, Compaq finally got out of the proprietary Alpha server business in a quasi-graceful exit marked by licensing Alpha technology to Intel in return for something that didn't quite make sense, while now agreeing to sell Intel-only servers.
Doesn't it sound like this record is going backward on all fronts?
Having tried and, to a large degree, failed to compete previously in high-end software and services, Compaq focused on the hardware side, putting its efforts into selling server boxes, PCs and handhelds. For the last few years, the idea holding it all together was Internet Ready.
Now the high-end market has gone decidedly nonproprietary, something IBM and Dell caught coming a few months ago, and selling your own closed-end servers or storage to enterprises is about as popular as selling ice cream in the Arctic.
(It is worth noting that Gartner claimed last week that Compaq sold more Storage Area Networks (SAN) than its competitors combined in 2000, with 48.5% market share, versus Dell's 3%, Sun Microsystems' (SUNW, news, msgs) 14%, EMC Corp.'s (EMC, news, msgs) 11%, Hewlett-Packard's (HWP, news, msgs) 7% and IBM's 2%. SANs represented 16.3% of the total multi-user storage market last year. Dell's attack in the Networked Attached Storage (NAS) market has to be considered as potentially offsetting various SAN projections over the next few years.)
Summary: Will this services strategy work now, after it failed before? Just because we can see why they are doing it (they can't get operating costs down to Dell's level, and so can't price compete on hardware), doesn't mean that it will.
This is painful to watch.
Horrible memory pricing, thank goodness
The spot-market price for 128 megabytes of dynamic random access memory (DRAM) has fallen to an all-time low -- below $2. Even contract prices are said to have gone under $3.
Gartner Dataquest, one of my favorite Rear View Mirror groups, put out a release lamenting how terrible this is. Here are a few of my favorite quotes, before we move on: "[Sales were] less than half of 2000, making it the worst year ever for memory sales since the Dawn of Time. Or before." And my other favorite: "In 1985 [the last time such a decline happened] it was the end of the home computer boom."
Did any of you know that the home computer boom, whatever that is, ended in 1985? Think about it for a moment.
Without bothering you with the rest of the drivel from this release, we can get pretty excited about the fact that DRAM prices are falling steeply; they’re almost free for the taking for a few minutes here.
Is that bad news? Let's launch another SNS Pop Quiz:
Q. What is the fastest-growing demand item in consumer devices today, from MP3 to video?
A. Memory.
Q. When comparing consumer to business technology device demand, where does consumer make its biggest differential in components?
A. Consumer devices use more memory.
Q. Are we currently in an age of dramatic growth in consumer or business devices?
A. Consumer.
Q. Will a precipitous drop in DRAM pricing accelerate consumer device sales, and therefore, development, in an already accelerating market environment?
A. Yes.
While rearview mirrors are helpful, you gotta love that big windshield.
There is almost nothing one could invent that would be more helpful in launching a revolution in technology than record-low DRAM pricing.
As for the vendors, it makes for a bad year, but, as they always have, they'll get theirs on the way back. It's the most cyclic business in technology.
Ethermail
Q. A reader notes that Mark has expressed an interest in the potential for a fuel-cell powered motorcycle and wonders if he has checked out a Canadian company called Global Thermoelectric (CA:GLE, news, msgs), which seems to have a deal with BMW.
A. I just love letters like this. So we take our SNS CellCycle concept vehicle, backtrack a bit on the Web, check out a few sources, and find out that Manhattan Scientifics (MHTX, news, msgs) and Aprilia have gotten together on a smaller "hydrocycle" concept vehicle, as noted in Fuel Cell Technology News' January issue:
"Manhattan Scientifics has agreed with Aprilia, one of Europe's largest manufacturers of motor scooters and motorcycles, to develop a fuel-cell-powered concept bicycle. Aprilia unveiled the bicycle -- a version of Manhattan Scientifics' hydrocycle bicycle -- in December at the Bologna Motor Show in Italy. A respected European motorcycle and bicycle maker, Aprilia says it is using the fuel cell technology developed by Manhattan Scientifics' European affiliate NovArs because of its significant weight and size advantages over other fuel cell technologies. The technology is ideal for supplying energy to electric drive systems in lightweight vehicles such as bicycles. …
"The concept vehicle is similar to the hydrocycle unveiled by Manhattan Scientifics earlier this year. It is based on an existing Aprilia electric bicycle and motor. Aprilia replaced its NiMH battery system with the Manhattan Scientifics' power system consisting of NovArs' fuel cell, fuel source, pressure reducer, and control electronics.
"Aprilia also modified the mechanical styling features to accommodate the fuel cell system. The fuel cell uses hydrogen supplied from a two-liter pressurized tank to provide 670 W of power to the bicycle drive motor at ambient pressure, with minimum ancillary equipment. This is sufficient to give it a range of 70 km to 100 km with one filling of fuel. Refilling takes only seconds compared with hours needed to recharge a battery. Aprilia says the approach also provides a significant reduction in the weight of the bicycle and in the operational range provided by batteries. It also potentially lowers the cost of the system.”
And, from the Battery and EV Technology January Issue:
Fuel Cells May Scoot Past Batteries
"Fuel cell-powered scooter sales are expected to soar in Taiwan. In 2000, about 16,000 battery-powered electric scooters were sold in Taiwan. Sales of fuel cell-powered scooters could reach 222,000 in 2002, and 319,000 in 2006, according to estimates by Jefferson Yang of Asia Pacific Fuel Cells Technologies (USA), Ltd. and Chunto Tso and Kitty Wu of the Taiwan Institute of Economic Research.
"Asia Pacific Fuel Cell Technologies has undertaken the development of the second-generation fuel-cell scooter, ZES II, since April 2000. …
"The ZES I had a maximum speed of 35 km/hr. with a 25-km range. The ZES II is projected to have a maximum speed of 65 km/hr. with a range of 70 km. The ZES fuel-cell target is a maximum speed of 85 km/hr. with a range of 160 km. The ZES II and future models are expected to have a refueling time equal to or less than that of a gasoline-powered scooter.
"In parallel to scooter development, efforts in hydrogen supply infrastructure have begun with the planning phase. One implementation strategy favored is to start demonstration regions in a number of selected cells of high population density urban districts. The regions will expand radically with time until they over-lap. To promote consumer acceptance, refueling of depleted hydride canisters must be made as, or more convenient than refilling the gasoline tank. The scheme is to exchange depleted canisters for fully charged ones at all existing gas stations, in addition to neighborhood convenience stores and scooter service shops. Central and local governments and regulatory bodies must be involved to ensure compliance to all applicable codes and environmental requirements.
"Taiwan and Asia, with their heavy dependency on scooters for mass transportation, have experienced serious air quality degradation caused by the polluting scooters. Battery-powered scooters are not being accepted by the consumers. The timing is right for the commercialization of PEM fuel cell scooter engines. …”
Guess what? The CellCycle is going to happen. It isn't quite ready yet, but you were there when we first talked about it. And it is going to be a HUGE success.
BMW may also be making CellCycle prototypes, but it seems to me that they had better get busy …
The CellCycle could revolutionize world travel and energy distribution, from the bottom up …
--------------------------------------------------------------------------------
©2001 Strategic News Service LLC; free trial subscriptions to Strategic News Service are available at tapsns.com. Mark Anderson is a principal in the investment advisory firm Resonance Capital Management LLC. Under no circumstances does the above information represent a recommendation to buy or sell stocks. |
