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Technology Stocks : George Gilder - Forbes ASAP -- Ignore unavailable to you. Want to Upgrade?

To: Sam Citron who wrote (709)	9/9/1998 4:42:00 AM
From: John Biddle	Respond to of 5853

I would not expect an island of stability in the telecom equipment sector. As much as I like the long-term outlook for LU and CSCO, these stocks are not exactly cheap. Both are solid members of the Nifty Fifty. . . . Considering the current fragility of worldwide economic conditions and the shakiness of financial markets, I would not expect these shares to escape the anxiety of stock markets generally. They will probably come down to more reasonable PEs before resuming their more traditional upward trajectories. I am not in any way suggesting that these stocks are not volatile, nor expensive. I was using them as examples of companies that would do well compared to carriers. No stock is a good investment at any price, I agree. I am long both CSCO and TLAB and see both continuing to do well going forward. I like the management of both firms, I think they understand their markets well, and I am in for he long haul. I tend to feel that the significant ratio to keep in mind is the subjective bandwidth/content ratio. Why do you need 60 channels of TV if the content is largely garbage? Because your garbage may be my cherished content and vice versa. You may not want 60 channels, but I bet you don't watch the same channels you used to. At least most people don't. Otherwise, how could cable flourish. In the future there will be more of this rather than less. The world does not need to come to its senses, we need a better way to drink from a firehose. If we could manage access to cable like we do the web, it would be growing even faster than it does now. Sure cable content is much mre expensive to develop than web content. But just as on the web, poor production values will be forgiven if you have the right content. There will be many combinations that work. Why spend money on your website if click-through on banner ads is negligible? Net advertising is in its infancy. It took awhile for advertisers to understand cable, and it will take awhile to understand the web. Not as long though. Segmentation is the word. Why expand your network if the entire business model rests on the necessity of unrealistically high penetration rates? I don't expect everyone taking a risk to profit. Most businesses fail. But the rewards to those that succeed are so desirable that there is never a shortage of bright, clever, hardworking folks ready to try. With so much capacity out there, and with Net stocks like AMZN at tulipmania levels, how do you justify investment in the bandwidth augmentation business? Whether AMZN is a good investment is a very different question from whether it's a successful company. The stock may have gotten ahead of itself (I certainly think it is grossly overpriced), but so what. Don't buy it. Or short it. But don't let your concern over the inappropriateness of the price of internet stocks get in the way of your understanding the trend here.