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Technology Stocks : Semi Equipment Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Donald Wennerstrom who wrote (5851)	10/5/2002 8:47:52 PM
From: Gottfried	Read Replies (3) \| Respond to of 95503

Don, I finally got the process of entering upgrades/downgrades in the correct cell of the price table automated. Here's the result. [the last downgrade listed on the earnings.com site was on 8/30/02. There were some after that, right?]. Upgrades and coverage initiations are green. home.attbi.com I can do this for any stock now. The data came from here earnings.com The chart shows that analysts' ratings are of little use. Gottfried

To: Donald Wennerstrom who wrote (5851)	10/5/2002 11:11:07 PM
From: Return to Sender	Read Replies (2) \| Respond to of 95503

Survival of the Fiscally Fittest Friday October 4, 2:40 pm ET By Donald Luskin biz.yahoo.com This article was originally published on SmartMoney Select on 9/27/02. I'VE WRITTEN SEVERAL TIMES in this column about the importance of buying the stocks of only the biggest and strongest technology companies. The theory holds that during tough times these companies would offset revenue losses to some extent with gains in market share, and be ideally positioned to head into recovery with fewer competitors. As the technology depression stubbornly perseveres this theory is evolving into more than just a good idea; it's a matter of survival. It's getting to where any company that's less than the best — even if it's second best — is at serious competitive risk. And for small companies with cool technologies but no market share, it's time to prepare for mass extinction. Consider realistically the state of the technology sector today. Back in the first quarter of 2000, at the height of the bull market, over half of the top 10% of U.S. companies ranked by market cap were technology firms. Now tech companies make up less than one-fifth of the top echelon. Instead, techs now dominate the very bottom of the barrel, making up almost 40% of the lowest-cap stocks. Of the 1,577 tech companies for which complete data are readily available, almost 70% showed a net operating loss over the past 12 months (and that's even excluding all of those supposedly nonrecurring items). Of the 70%, almost half don't have the cash on hand to withstand that much red ink again. Unless some show evidence of recovery soon — in a technology economy, mind you, that's stagnant at best — it could be lights out. There's little hope that the public capital markets will come to their rescue with cash infusions since almost half of the entire tech-stock universe is trading below $2 a share. Would you lend money to them? Sure, as an article in Barron's pointed out this week, there are some technology companies that are cash-rich. It even published a list of techs with market caps lower than the value of cash on hand, including Corvis (NASDAQ:CORV - News), Sycamore Networks (NASDAQ:SCMR - News) and Tibco Software (NASDAQ:TIBX - News). The normally conservative Barron's goes so far as to say that "their businesses can essentially be purchased free." How can you lose, right? Wrong. Tech die-hards have trotted out lists like this many times over the past two years, and they've never been anything but bull traps. Those companies didn't get that cash because they were successful — they got it from doing absurdly priced IPOs when the getting was good three years ago. And the fact that they are trading for less than the value of their cash now just means the market thinks their strategic prospects are especially dismal — the market is saying that these companies aren't even worth their cash. There's no such thing as a free lunch, and there's certainly no such thing as a free company. Companies with real strategic prospects — the kinds of companies that can weather the technology depression and come out the other side — came by their cash the old-fashioned way: They earned it. But they aren't trading at a discount to their cash hoards. Microsoft (NASDAQ:MSFT - News), with $37.8 billion in cash and no debt, is trading with a market cap of $245 billion. Cisco Systems (NASDAQ:CSCO - News), with $12.7 billion in cash and also no debt, has a market cap of $83 billion. Cash is no guarantee of success — nothing ever is, especially now. But consider the alternative: Try doing business in today's technology recession without it. Look what happened this week to Electronic Data Systems (NYSE:EDS - News), which is facing a worse-than-expected revenue decline and potential credit downgrades with a mere $275 million in cash on hand. While $275 million may not seem "mere" to you and me, for a gigantic technology-services company trying to win business away from the likes of IBM (NYSE:IBM - News), it rounds to zero. That's why EDS dropped 29% on Tuesday after a Merrill Lynch analyst pointed out that the company might no longer be able to effectively compete for the biggest service contracts, because they require so much upfront investment by the provider. EDS is no penny stock — at least not yet. Even after the drubbing it has taken in the market over the last couple of weeks, its market cap is still above $5 billion. But the life-and-death danger it's in suggests that a tech-stock strategy based simply on buying big companies isn't enough anymore. Some of those big companies are at risk of becoming very little companies now — very fast. Now the best tech-stock strategy is about more than picking survivors — it's about picking the best survivors. The biggest winners now won't be the huge companies that will benefit from the coming mass die-off of hundreds of smaller competitors. It's probably the case that they've already gotten whatever advantage they're going to get from that. Now it's big company vs. big company. We're in the endgame, when the survivors battle each other to see who will emerge as the top dogs of tech. In every technology category there's going to be a battle to see who will be the survivor. And financial strength, including cash, is only one of many weapons that the combatants will use. For example, Dell Computer (NASDAQ:DELL - News) has only a quarter as much cash as Hewlett-Packard (NYSE:HPQ - News), but I'm betting on Dell to keep stealing market share in personal computers from H-P. Dell remains maniacally focused on production and marketing efficiency, and on enhancing customer experience. All H-P is thinking about is whom to throw overboard to slim down the bloated organization that resulted from the merger with Compaq. As another example, which I've discussed before in this column, Cisco is clearly going to win in the networking-equipment domain. Already during the tech depression they've grown market share impressively. And it's no surprise: Networking equipment is expensive, long-lived and requires lots of service to install and operate. With competitors laying off personnel en masse, running out of cash and having no access to capital markets, what customer would take the risk of buying networking equipment from anyone but Cisco, even for significant price concessions? It's not like it used to be in technology investing, is it? Remember when everyone could be a winner? All you had to do was invest in tech stocks — any tech stocks — and you'd feel like a genius. But now you really have to choose. Because now, when you bet on one of the gladiators in the arena, you'd better be sure to pick the right one...because the other ones are all going to die. Donald Luskin is chief investment officer of Trend Macrolytics, an economics consulting firm serving institutional investors. At the time of writing, he held shares of Cisco in his personal account. You may contact him at don@trendmacro.com. I hope you have a great time while we are here toiling away in the Wennerstrom Salt Mines. Have fun, RtS