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

To: techreports who wrote (47091)	9/25/2001 6:35:53 AM
From: Bruce Brown	Read Replies (1) \| Respond to of 54805

basically, i'm saying that how do you know Microsoft will be profitable 5 years from now? Buying JDSU stock today discounts that JDSU may not turn profitable. MSFT stock on the other hand is assuming they will continue to dominate their market which could be wrong. I don't know if it will be profitable 5 years from now. Some things I can look at in the current time frame though which provide an addition when contemplating risk include the balance sheet at Microsoft as well as their domination of a product adoption life cycle. That's not to say a discontinuous innovation is not coming that will change the outlook for the 5 year period from now or that the balance sheet will fall apart. Until that discontinuous innovation (or substitution threat) is demonstrated with and achieves enough success to demonstrate that Microsoft no longer has a lock, one has to accept the 'risk' as an investor that Microsoft may have the ability to turn a profit in the future. It remains in many portfolios because of the balance sheet, brand name and their gorilla lock. No predictions. I'm less sure, in terms of risk aversion, about the prospects of JDS Uniphase and that comes from simple gorilla gaming criteria and balance sheet review. The company and their products have been debated here as well as the Fool GG board. I was simply challenging the aspect of predicting that profitability is 'in the cards'. I would love for it to be true, believe me. hmm...I2 was a profitable business and now they are losing millions per quarter. Tell me again, why is the proof in the pudding? And the market foretold i2's profits back a few years ago, just as it foretold the losses that eventually came. If you take a look at their cash position and their annual burn rate, they will indeed need a recovery in demand for their core business to get back on the profit side of the ledger. They are not alone, by any means, in the IT software industry at the current time. I have no qualms about discussing companies that may or may not be seeing profits in the future. I just was pointing out that 'predicting' JDSU's return to profits in the current environment may require more 'proof' for investors to see that before they will be convinced that the company has turned the profit corner. Eric provided a pasted article discussing i2 which included estimates that may or may not fall under the category of prediction. Reality is we have to see if the market begins to anticipate a return to profits and what those profits will be. Depending on one's diverse mix of 'risk', there are investments that do currently have profits - as well as estimates for continued profits. Yet, EPS estimates are being slashed left and right for equities amidst the known and the unknown. BB