Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : The New Economy and its Winners -- Ignore unavailable to you. Want to Upgrade?

To: Lizzie Tudor who wrote (10351)	1/13/2002 3:00:25 PM
From: stockman_scott	Respond to of 57684

Venture capital group funds technology for CIA's benefit Copyright © 2002 AP Online By BRIAN BERGSTEIN, Associated Press MENLO PARK, Calif. (January 12, 2002 7:59 p.m. EST) - Technology entrepreneur Neil Senturia got a surprise phone call one day from a man at the CIA. When a friend asked how it happened, Senturia joked: "They're the CIA. They find anything they want." Actually, the CIA has not always had the easiest time finding what it needs from the fast-moving world of technology. Which is why three years ago, it launched a nonprofit venture capital arm, In-Q-Tel. Since Sept. 11, the unit's mission of investing in up-and-coming technologies has become more urgent. Fortunately for In-Q-Tel's 40 employees in Menlo Park and Arlington, Va., hundreds of tech companies have come calling. The CIA can give an obscure technology a large-scale testing ground, an early entry into government and some valuable credibility. "If it's good enough for an organization like the agency, heck, it's good enough for most large corporations," said Nimish Mehta, the head of Stratify Inc., which got several million dollars in funding from In-Q-Tel last year. Stratify is among a handful of companies that can find important tidbits of "unstructured data" - information scattered throughout organizations in word-processing files, e-mails and databases, for example - and put them together in a way that makes sense. The technology is of particular interest to the CIA because the agency is under increasing pressure to process piles of intelligence information more quickly. To that end, In-Q-Tel invested $1 million in November in Tacit Knowledge Systems Inc. of Palo Alto, which scans e-mail to determine who in an organization has potentially insightful expertise someone else should know about. Senturia's San Diego-based Mohomine Inc., which also attracted an In-Q-Tel investment of at least $1 million last year, makes software that culls and categorizes information spread across various kinds of documents - even in foreign languages. Mohomine, Stratify and Cincinnati-based Intelliseek Inc. are helping the CIA soup up its Foreign Broadcast Information Service, which monitors overseas radio, newspaper and Internet reports. "Our mission is to go after technologies that are going to get to market anyway," said Gilman Louie, In-Q-Tel's chief executive. "We want to get there ahead of time. We want to get there early." In-Q-Tel gets about $30 million per year to spend on investments and technology analysis; any profits must be plowed back into operations. It has purchased technology from about two dozen companies and taken equity stakes in at least 13. Most recently, In-Q-Tel agreed to license e-mail collaboration software from Zaplet Inc. and a multi-language Internet search system from Northern Light. Many In-Q-Tel employees have no CIA or government experience, including Louie, 41, a former video game developer who created the Falcon computer flight simulator and first published the enormously addictive game Tetris in the United States. Louie and his team often get tipped to new technologies by other venture capitalists looking to team up. They also consult regularly with researchers at national laboratories and big companies. "They are so sophisticated in their vetting of technology that they put us through a process that was really rigorous," said David Gilmour, head of Tacit Knowledge Systems. "We inherited a huge technical resource that's on our side and is available with a phone call." The "Q" in In-Q-Tel is a reference to the gadget guru who outfitted James Bond with tiny homing beacons and ejecting car seats. The technologies In-Q-Tel has unearthed for the feds are less cinematic, but pioneering nonetheless. A sampling: - Browse3D Corp. of Northern Virginia can show Web surfers several pages at once in virtual "rooms" that reveal what lies behind links. - Graviton Inc. of La Jolla makes networks of tiny sensors that communicate with each other and relay information to a user-friendly computer interface - "a nervous system for the engineered world," said Graviton's top engineer, Larry Goldstein. For now, potential customers include convenience stores that need to monitor their refrigeration units. The sensors could someday be used to detect explosives or chemical or biological agents. - SafeWeb Inc. of Emeryville recently shut down a free service that let Internet users bypass Web censorship by governments and corporations. But the company is pressing ahead with a commercial version. This winter, the CIA plans to begin testing the product, which would let analysts visit foreign Web sites without leaving any trace they came from cia.gov. "Everybody's very excited about what In-Q-Tel has brought," said Thomas Benjamin, director of a team of 13 CIA officials who work with In-Q-Tel to determine what the agency needs. "It's definitely improved our insight and reach into those technologies that probably would have eluded us."

To: Lizzie Tudor who wrote (10351)	1/13/2002 5:13:31 PM
From: Bill Harmond	Respond to of 57684

But technology may change the nature and shape of downturns, making them sharper but shorter because businesses have the ability to access timely information and adjust operations accordingly, the Fed chief said. As McNally put it, a business curve that looks like a Bill Clinton polygraph. IMO, he now realizes that the new economy requires cheap capital still, but the payoff is logarithmic, and an economy growing at 4% is not at melt-down. Finally. If he had known this all along he would have eased four months earlier.

To: Lizzie Tudor who wrote (10351)	1/14/2002 12:02:42 PM
From: stockman_scott	Respond to of 57684

Chet Currier: Hedge funds to face risks by playing in public arena Wider market would mean wider scrutiny The Dallas Morning News 01/14/2002 By CHET CURRIER NEW YORK – The mischievous gods of coincidence had some fun the other day at the expense of hedge funds. They arranged for the simultaneous appearance of two news stories that made, shall we say, an awkward couple. The first, in the Wall Street Journal, said these exclusive partnerships for wealthy investors want to broaden their market, and are willing to subject themselves to "increased public scrutiny" in exchange for regulatory clearance to do that. The second, a Bloomberg News story on investment performance for 2001, was headlined "Hedge Funds Barely Match Returns of Treasury Bills." The funds' average gain for the year came in at about 4 percent, compared with 4.4 percent on Uncle Sam's ultra-safe three-month bills. Reading the Journal story, my first thought was "risky trade." Hedge-fund operators would have to gain an awful lot of new business to justify what it might cost them if they compromised a valuable asset – their mystique. The second story only served to dramatize the slings and arrows that increased exposure might bring. Different game Mutual-fund managers, who have long labored in a fishbowl environment, get pummeled regularly for their collective inability to beat the market indexes. Hedge funds, not subject to the same disclosure requirements, have mostly escaped that kind of examination, aided by a scarcity (until recently, at least) of widely publicized gauges of their performance. It's a heterogeneous species. The single label "hedge fund" is applied to vehicles that range from swashbuckling short-sellers in the stock market to risk-shunning arbitrageurs specializing in niches such as convertible bonds. To hedge, in its original financial meaning, is to protect oneself by offsetting one risk against another. There are innumerable ways to apply that principle in practice – or to stretch it, as the case may be. Semantics aside, many people suppose that something inherent in hedge funds makes them better than mutual funds. Hedge-fund managers usually have greater freedom to maneuver, after all, and the pay incentives are often juicier. Anecdotal evidence sometimes gives this perception added credence. Recall the tale of Jeff Vinik, a prominent mutual-fund manager who went on to greater glory when he left Fidelity Investments in 1996 and started a hugely successful hedge-fund firm. At the height of the Internet boom we heard all the time about technology-stock managers leaving mutual-fund firms to join or start hedge funds. Greener pastures, everybody said. The aura hasn't succumbed to the crackups that occur from time to time in hedge funds' high-risk world. The most famous of these, a drastic loss at Long-Term Capital Management LP, made headlines scarcely more than three years ago. Hedged with hype? Sure, the markets are full of opportunities of the sort academic researchers call "inefficiencies." But these openings tend to get narrower and narrower, to the point of disappearing altogether, as more people try to exploit them. That's the way markets work. Occasional efforts so far to bring a hedge-fund-style approach to mutual funds haven't met with great success. One thinks of RS Investments' celebrated Contrarian Fund in San Francisco, which suffered through back-to-back losses of 29.5 percent in 1997 and 32.5 percent in 1998. At last report by Morningstar Inc. it had assets of $67 million, down from a mid- 1990s peak of more than $1 billion. Let's be open-minded. Hedge funds for the masses may deserve a broader trial than they've been given to date. The chances of success won't be good, though, unless the product is sold to investors with a clear understanding of what they're getting into. Otherwise, there's all-too- obvious potential here for an ugly cycle of hype and disillusionment. _________________________________ Chet Currier is a Bloomberg News columnist.

To: Lizzie Tudor who wrote (10351)	1/16/2002 4:55:02 AM
From: stockman_scott	Respond to of 57684

Three Cheers for the Middleman Tuesday January 15, 4:31 pm Eastern Time SmartMoney.com - Sector Patrol By Roben Farzad THE LAST DECADE gave us more new companies hawking vague e-business ``solutions'' than any Silicon Valley marketing dweeb ever could have imagined. Take, for instance, Macromedia (NASDAQ:MACR - news), which ``develops, markets and supports software products, technologies and services that enable people to define what the Web can be.'' Or Minnesota-based Digital River (NASDAQ:DRIV - news), an application-service provider that would rather bill itself as one-stop shopping for ``comprehensive electronic commerce outsourcing solutions to software publishers and online retailers.'' Even Netscape wunderkind Marc Andreessen, by way of his new firm Loudcloud (NASDAQ:LDCL - news), is marketing services and technology that ``address the challenge of deploying, maintaining and scaling mission-critical Internet operations for established and Internet-based businesses.'' We don't understand it either. But even if investors haven't the faintest clue what, if anything, these spy-code-sounding companies actually offer, they've been pouring loads of cash into the Web-centric software group of late. Our SmartMoney Sector Tracker shows the Internet services/software universe up a dapper 12% so far this year, led by 30%-plus surges by the likes of Portal Software (NASDAQ:PRSF - news) and BEA Systems (NASDAQ:BEAS - news), and 25% leaps by Macromedia and Digital River. Kana Software (NASDAQ:KANA - news), a $4 stock on Oct. 1 that had hit $19 by New Year's Eve, now trades at $23. Compare these stellar gains with the Nasdaq's 2% year-to-date return, and it's clear that Net software companies are hotter than hot. And there's a good chance that 2002 will be the best year for this group since the software spending frenzy leading up to Y2K. Valuations are starting to run up across the board, but you can still participate in the rally if you take the middle ground. By that we mean middleware, the species of software that corporations need to tie together the scores of applications and highfalutin solutions — Web, database, e-commerce — they adopted during the tech bubble. ``If you're a chief information officer, you're thinking, 'How can we connect all these applications together now that we have so many?''' says Erick Brethenoux, who covers software for Lazard Freres. ``Middleware companies therefore become unavoidable, despite the economy.'' Or because of the poor economy. IT managers are working with fewer dollars in these days of tight corporate budgets. A 2002 software survey by seven Goldman Sachs software analysts, including sector dean Rick Sherlund, illustrates the growing trend of using software integration to squeeze more from what companies already have. Having cut plenty of corporate fat and perhaps too much muscle last year, the report notes, companies have left themselves open to the possibility of declining revenue and profit growth — the paradox of thrift. If they now decide they must loosen their investment purse strings, they're likely to spend first and foremost on productivity enhancements. The goal will be to ``optimize physical, human and capital assets'' through smart and targeted — not sweeping — software outlays, says the report. As a result, Goldman is warming up to resurgent Ariba (NASDAQ:ARBA - news), whose flagship Buyer procurement tool now offers cost-saving functions like travel and expense management, work-force management and invoicing. In addition to its packed 2002 pipeline of productivity and cost-saving software, Ariba is working with the National Association of Purchasing Managers to set sector-specific performance benchmarks that allow corporations to see how their numbers stack up against those of their rivals. And to think you used to have to pay McKinsey & Co. $5 million for that. Brethenoux's favorites are Iona (NASDAQ:IONA - news) and Vitria (NASDAQ:VITR - news), two niche players whose integration specialties have yet to be aped by the software sector's big guns. That, incidentally, points to another positive for small middleware stocks: Deep-pocketed powerhouses like IBM (NYSE:IBM - news), Oracle (NASDAQ:ORCL - news) and PeopleSoft (NASDAQ:PSFT - news) are quickly realizing they can no longer ignore puny middleware in order to fry bigger fish. Uncontested, these minnows are fattening up quickly; For the nine tumultuous months ending Sept. 30, Ireland-based Iona, which sports a smallish $680 million market cap, saw sales shoot up nearly 30%. The easiest way to catch up to these shallow-water upstarts is to gobble them outright. ``Consolidation is inevitable,'' adds Brethenoux. But perhaps the biggest catalyst that will drive middleware spending is the tragic events of Sept. 11, which underscored the need for data backup, storage and accessibility. Storage software specialists like Veritas (NASDAQ:VRTS - news) and Legato (NASDAQ:LGTO - news), for instance, have seen their share prices soar since the attacks, as have scores of wireless software and device companies offering to build virtual offices that can tie together employees at different locations during an emergency. That adds a whole new layer of software complexity that demands integration. Moreover, having witnessed the relocation ordeals of World Trade Center neighbors Lehman Brothers (NYSE:LEH - news), Merrill Lynch (NYSE:MER - news) and Dow Jones (NYSE:DJ - news), corporations are espousing the idea of constructing fully operational backup centers at least 100 miles from headquarters. All of these roads lead back to middleware specialists. Whether Vitria, Iona, webMethods (NASDAQ:WEBM - news) or Tibco (NASDAQ:TIBX - news), niche software players with application-specific specialties are the only companies that can configure the countless integration nuts and bolts involved in backup and relocation. Their surging shares reflect their competitive foothold. ``Despite economic uncertainty,'' argues the Goldman software report, ``customers feel this area is too important not to spend on it now.'' Investors seem to agree.