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

To: Carmine Cammarosano who wrote (637)	3/9/1999 1:19:00 PM
From: Chuzzlewit	Read Replies (1) \| Respond to of 1492

Hi Carmine, just thought I'd put my $.02 in here. I'm not hollering at you, but I need to vent a little steam. OT I frankly find this upgrade/downgrade price target game tiresome. Brokerage houses make their money in two ways: the investment banking component and the brokerage component. The analyst is the step-child of the brokerage business but his parent is the banking side. So whatever the analyst's real opinion of a company, he must temper it with the practical reality that low stock prices depress IPO activity which is why so many folks at Merrill were depressed during the fall. And who wants to lose a large company as a client? But beyond the issue of conflicting masters, we also have the issue of insight. If you are an investor dealing with a top tier company like Intel should you have paid attention to Tom Kurlak? I contend that the answer is no, for several reasons. The first one should be patently obvious: he cannot get information that is more accurate than the company provides regarding internal operations, and that view is necessarily short sighted. Basically, the best he could do would be to look a few years out. But with leading-edge companies the real issue is what exists for the intermediate to long term: say 5 -15 years out. And the best company analyst cannot provide that kind of window. I think what is needed more than anything else is a futurist's perspective first: what is the like future of this broad industry group over the next couple of decades? Only a lunatic would contend that the prospects for the design, development and production of various advanced electronic devices has anything but a rosy future. So the trick is to figure out which companies are most likely to profit given that future. Or to put it another way, can we winnow out the obvious chaff? This is where I'd like to see analysts focus their attention. The other reason that Kurlak should have been ignores is the setting of price targets. Valuation is such a complex issue that I am mystified that any house would have the audacity to attempt this superhuman feat. Sure, we could always rely on the notion that a company is valued based on the discounted value of future cash flows or use variations of CAPM to come up with numbers, but ultimately we must deal with a future that transcends the next quarter's earnings. So for all of these reasons I tend to ignore analysts opinions with one exception: when an analyst's focus is on ferreting out information that companies try to hide, that analyst becomes a very important person in my eyes. But unfortunately this kind of activity is in conflict with the brokerage house's investment banking activity. So here are the questions for all you amateur analysts out there: where do you see the software industry 5 - 15 years out? Do you see BMCS as a major player in that future? What skeletons exist in BMCS's closet. Inquiring minds want to know. TTFN, ^-^