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Technology Stocks : ACLY- ACCELR8. Year 2000 Stock -- Ignore unavailable to you. Want to Upgrade?

To: Andrew Abrams who wrote (1120)	2/23/1998 11:18:00 AM
From: Mr Logic	Read Replies (2) \| Respond to of 1518

Andrew, >>When the Y2K stuff is done, companies will spend a bit more than usual to migrate away from proprietary platforms, but as I mentioned, it wont carry high margins.<< Wouldn't the reverse would be true? One of the significant reasons for the high cost of the y2k fix is that many companies are taking the opportunity to migrate from old systems sooner rather than later, replacing them with new, y2k compliant applications. So after 2000 it seems likely that the older/proprietary systems that have not been replaced will be there largely as a result of a decision to keep (and fix) them. P.

To: Andrew Abrams who wrote (1120)	2/23/1998 7:18:00 PM
From: CalculatedRisk	Read Replies (1) \| Respond to of 1518

AA, using the term "franchise" to describe ACLY's Y2K business is correct in an English sense .... but IMO, ACLY does not fit the investment meaning. The concept of investing in "franchises" has been around for years. In the MBA lexicon, it is typically referred to as companies with a SCA ... Sustainable Competitive Advantage. Or, as Mr. Buffett so aptly puts it, invest in The Inevitables! The idea is pretty simple but takes hard work and analysis. Companies like KO, NKE and MCD all sustain their advantage with brand awareness. WMT, DELL and GE are low cost producers in their industries. MSFT and INTC rely on technological innovations and low cost production. SCAs are usually achieved through innovation (WMT with their distribution system) and maintained through low cost production. The investment strategy is that these companies will hold on to their position and continue to perform well as long as they maintain their SCA. Investors are willing to pay a premium for these companies because making money is "inevitable". If you overpay now, that is OK (so the thinking goes), you'll eventually make money. ACLY's Y2K business is NOT inevitable. In fact, Y2K ends in a couple of years ... give or take a year. If you overpay now (IMO, anything above $2 is too much), you'll never get a return on your investment. This is NOT a "franchise" in the sense that it will eventually work out ... like 5 years ... 10 years ... or more down the road. It is much better to call ACLY's opportunity a "bubble" or a "perishable franchise". Either way, discounted FCF is the proper way to analyze this Company. No way should an investor pay a premium! Regards, Bill