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

To: Bruce Brown who wrote (46392)	9/10/2001 8:20:28 AM
From: hueyone	Read Replies (1) \| Respond to of 54805

Barron's had a mention of BEA Systems on a valuation basis this weekend. Hello Bruce: Yes, there was a round table discussion featuring Kevin Landis, Walter Price, Paul Wick, and Roger McNamee. BEA was listed as one of Landis' picks and Price's picks, but there really wasn't any clear discussion regarding valuation. Here is the text for discussion regarding BEA: Landis: We agree that Intersil is very interesting. But a favorite of ours is BEA Systems. I would put BEA in a category of great company with a great vision and a great franchise and really, really lousy performance lately. If you look at the stock chart, it has fallen really hard. It was one of the last companies to guide its numbers down. Q: Paul, what do you think of BEA? Wick: At Seligman, we have a hedge fund that has been up and running for two months. And it was one of our shorts until we covered about three weeks ago. Our feeling was that IBM was being very price aggressive. That Oracle was going to be bundling an application-server product, as well, along with its database. On top of that, BEA was very expensive, and the company was eating into its backlog. Q: What are its long-term vulnerabilities? McNamee: BEA's biggest advantage is that it's a platform company. [BEA produces a layer of software upon which Web applications are designed.] Unfortunately, that means that they cannot vertically integrate into applications; it puts itself in competition with the companies that it needs as partners. In a bear-market environment, the stock is tremendously vulnerable to the kinds of issues Paul just raised. In any other kind of environment, I think that the glass at BEA is well more than half full. And to the extent that there is a company that might well emerge as the Microsoft of Web infrastructure, this is the early candidate. Q: Couldn't Microsoft be the next Microsoft? Price: I think Microsoft is the one that will grow. Fundamentally BEA and IBM are dependent on Java being accepted as a way to do Web applications. And right now, Java is very popular with engineers. But Microsoft, with Dot.Net, is working very hard to marginalize Java. Q: In the end, does Microsoft get the consumer market and BEA gets the corporate market? Price: No. Microsoft wants Dot.Net to get the corporate market. It is very focused on that. It's spending $5 billion on R&D. So you've got to say that the odds are with Microsoft. McNamee: The truly astonishing thing is that Microsoft, having spent all that money since 1995 and having made this core focus of its Internet strategy, has been totally incapable so far of putting a dent in BEA. I find that's totally astonishing, and that's the one thing that really keeps me up at night. And I think that BEA's only hope is to be the partner of every major player that competes with Microsoft. Management must remain rigorously focused on being a platform player. That is a great strategy, and as long as BEA stays there, I think that it should be at least okay. Best, Huey