Lindy,
I must disagree, he posted this URL
Message 6973339
and here is the article. I wouldn't call it a worthless post.
Networkers Get Swept Up
In the Mania for Net Stocks
By LISA BRANSTEN
THE WALL STREET JOURNAL INTERACTIVE EDITION
SAN FRANCISCO -- If investors are valuing companies like Yahoo! and
Amazon.com at $23 billion and $17 billion, respectively, then doesn't it
only make sense that companies building the infrastructure allowing those
companies to grow should be worth as much -- or more?
Such thoughts appeared to be crossing investors' minds this week as
networking companies sipped from the gusher of Internet enthusiasm that
has been driving the stars of Internet commerce and content heavenward.
Networking companies Cisco Systems, 3Com and Ascend
Communications all started out the week on an upswing and got a further
boost Wednesday in the wake of 3Com's posting of better-than-expected
earnings for its fiscal second quarter.
Of course since networking companies do not yet move in Internet time it
has taken shares in 3Com two months -- not two days -- to double. Still,
that's a healthy return by any standard other than that set by the Yahoos of
the tech-stock world.
On Thursday shares of all three companies slipped, but all were just off
52-week highs set earlier in the week. In Nasdaq trading Thursday, shares
of Cisco slipped 2 5/16 to 94 3/16, 3Com shed 1 1/2 to 46 1/4 and
Ascend fell 3/8 to 66.
Meanwhile, the Nasdaq Composite Index slipped 9.51 to 2163.03 in a
shortened session Thursday, while Morgan Stanley's high-tech 35 index
retreated 6.07 to 860.71.
Cisco is no slouch when it comes to valuation -- it has a market
capitalization of almost $150 billion, which makes it the third-biggest
company on Nasdaq. And the company's shares have almost tripled over
the course of this year.
But nothing turns the company's share-price chart into a pancake faster
than a comparison to the more than tenfold gain Amazon's shares have
seen so far this year.
Ascend and 3Com, meanwhile, are both valued less than Yahoo -- even
though they are expected to generate far bigger earnings than the
portal-site giant.
With investors starting to make these comparisons, the recent enthusiasm
for networking companies isn't surprising. But it does worry some analysts.
"To a certain degree the networking companies -- especially Cisco -- have
crossed the border into the Internet-enthused valuations," said Christin
Armacost, an analyst at Everen Securities Inc. "If you start your valuation
process by looking at Amazon and Yahoo and then move over to the
companies who are really building the Internet, then the valuations are
justifiable."
Such a methodology isn't necessarily the best way to value company, she
conceded. Still it's tough to fight investor psychology, which puts the
networkers in the high-flier camp along with the Yahoos and Amazons of
the world, she said.
She has all three networkers rated "buy," with six-month price targets of
102 for Cisco, 55 for 3Com and 69 for Ascend.
But there are some analysts willing to fight the tape on Cisco. Paul
Sagawa, an analyst at Sanford C. Bernstein & Co., has the giant rated a
"market perform" because he is "cautious about the degree of Internet
euphoria in Cisco's stock."
Cisco now trades at almost 60 times expected calendar 1999 earnings,
and Mr. Sagawa thinks that implies investors have lofty earnings
expectations that the company could have a hard time living up to.
He adds that the bulk of Cisco's revenues come from sales to big
corporations that are building networks, rather than from sales to
companies building the Internet backbone. He expects those
intranet-building companies could scale back tech spending next year.
"[Cisco executives] understand that the growth in communications
generally is going to come from the Internet rather than selling office
equipment," Mr. Sagawa said. The company is clearly focused on
increasing sales to telecommunication-service providers, and that should be
a good thing in the long term, he said, but adds that "when companies go
through these kinds of transitions, rarely do they do so without seeing some
sort of a hiccup."
Mr. Sagawa has "outperform" ratings on 3Com and Ascend.
Thursday's Market Activity
Online auctioneer uBid put up gains of 50 3/8 and 53 1/2 Tuesday and
Wednesday, so it was almost inevitable that some pullback would be in the
works. That's what happened in Thursday's truncated trading day, as the
company saw its shares plunge 66 3/8, or 35%, to 121 5/8. That dragged
down Creative Computer -- which owns an 80% stake in uBid -- 19 5/8,
or 33%, to 40 1/16.
Shares of Multiple Zones International fell 26 1/2, or 47%, to 29 1/2, a
day after investors cheered news that the company officially launched an
online-auction service by sending its shares up 44 7/16. Online-auction
leader eBay, meanwhile, fell 12 to 286.
Internet-retail king Amazon.com slipped 3/16 to 324 13/16, while
America Online fell 1 3/8 to 136 5/8. Elsewhere, Onsale slid 3 to 60 1/2
and portal giant Yahoo! skidded 2 7/8 to 247 1/8.
Shares of Zapata, the Texas fish-protein and food-packaging company
with dreams of becoming an Internet powerhouse, fell 1 7/8 to 12 3/8 a
day after the company said it was relaunching its Internet plan two months
after calling the whole thing off amid a downturn for Internet stocks.
Delia's advanced 7 1/4, or 67%, to 18 1/8 after the seller of apparel and
accessories for young women opened an online retail site on Yahoo!
shopping.
Shares of SkyMall, an in-flight catalog company, rose 6 3/16, or 97%, to
12 9/16, apparently boosted by talk on Internet message boards.
Meanwhile, shares of PC Connection, a direct marketer of brand-name
personal computers and related peripherals, software, accessories and
networking products, rose 8 1/4, or 59%, to 22 1/4, possibly in reaction
to the company's being mentioned on CNBC Wednesday.
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