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Technology Stocks : Compaq -- Ignore unavailable to you. Want to Upgrade?

To: rupert1 who wrote (51065)	3/2/1999 11:55:00 AM
From: Elwood P. Dowd	Respond to of 97611

3rd Wave Connections Inc. Newsletter 3/1/99 41% return on investment since Jan 4, 1999! That's right, as of Feb 26th, 1999 our stock picks since Jan 4, 1999 are up a whopping 41%. Our Jan 1998 stock picks are up 290% in less than 14 months. We can't guarantee these kinds of results all the time but our 3rd Wave Business Model really works! In our Feb 24th 3rd Wave Newsletter, we featured Christy Jones and PcOrder.com. PcOrder.com (PCOR) went public Feb 26th, 1999. It opened at $21 and quickly rose to a high of $59 ½ and closed the day at $47 per share. On the same day, Dell, Gateway and Compaq were all down sharply. Compaq was down by over 13%. What is happening here? Let's review key developments: Oct98 - 3rd Wave Connections predicts the market cap per unique user on the Internet will reach and exceed the cost of hardware and software to connect to the Internet. 3rd Wave predicts that free PC's will be given to select Internet users. Yahoo's market cap per unique monthly user is at $500. Jan99 - Yahoo's market cap per unique monthly user hits $1000. Jan99 – FreePC.com announced it was giving away 10,000 PC's FREE to individuals who signed up to get certain advertisements. They will use Compaq Presario's. Over 1 million people signed up for the free PC's in the first 7 days. 2/24/99 3rd Wave reports on PcOrder.com and highlights the risks to commodity PC producers like Dell and Compaq. 2/25/99 Compaq announces that it will NOT sell the Presario to any company that doesn't have a brick and mortar store. This includes PcOrder.com 2/26/99 PcOrder .com goes public at $21 per share. 2/26/99 Compaq, Dell and Gateway drop sharply on the stock market while PcOrder more than doubles in value with its IPO release. Here is our take on this: Let's first look at another industry as an example. This week Forbes Magazine announced that drive-in movie theaters have virtually disappeared faster than any industry except for asbestos products. . On the rise are high dollar cinemas and video/cable rental. The middle is gone. The market has gone from the traditional “bell curve” where you target the middle of your marketplace to an “inverted bell curve” that we call Death Valley. Middle of the road companies are dying. Low cost commodity and full service providers will prosper in the 3rd Wave economy. The technology of the 3rd Wave has allowed us to produce complex products and offer them to the public as if they were commodities. On the other side of the Valley are the customers who want full service with their products. To compete there, your service must be impeccable. In this drive-in movie example, the commodity side of this valley, you can rent movies or view them on cable. On the high service side you can view movies in a theater with stadium seating and high back chairs. Both sides have grown tremendously over the past 10 years. We see this pattern everywhere. In the auto industry, banking industry, service stations, movie industry and the computer industry. This “wedge” drives companies in the middle into a Death Valley if they don't choose a clear 3rd Wave peak. Now, let's get back to the computer industry. Dell and PcOrder.com are going the commodity route. Gateway is going the high service/ personal touch route. Compaq with their alignment with FreePc is taking the commodity route but wait a minute they are also withdrawing from Internet sales. Apparently, with the realization of over a million people clambering for the free PC offer, Compaq has decided to leapfrog over Dell and PcOrder.com to offer FREE PC's. Compaq now only allows authorized “brick and mortar” dealers to sell on the Internet. They are playing both sides of the Death Valley. All four of these companies know what they are doing. It's a battle. Compaq is playing a high risk and complex game with these free PC's but also hedging its bet by playing both sides of the valley.Predictions: Compaq is making some major changes right now and their earnings may see some short term setbacks. However, we believe Compaq is in the flow to prosper with the latest trends! PcOrder.com needs to follow Compaq's lead quickly and team up with a web advertiser. We have two Internet advertisement companies in our portfolio. 24-7 Media (TFSM) and Doubleclick (DCLK). We predict PcOrder will do this in the next 30 to 60 days. Dell is getting dangerously close to the middle now. If they are going to win at this commodity game, they will have to pick up some tips from Compaq and PcOrder.com. Gateway is playing the high service game. Look for them to team up with an Internet Service Provider and focus more on their “YourWare” product. The trouble is, the customers who need and want high service are not the power users and they don't need a real powerful computer. Look for smaller boxes from Gateway that you can purchase by signing a contract and paying a monthly fee. It will be financed then delivered complete with a home page and email already setup for you. These latest trends in PC manufacturers are BIG. Our stock selections take these trends into account. Subscribe now to see our latest stock selections.