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Technology Stocks : Oracle Corporation (ORCL) -- Ignore unavailable to you. Want to Upgrade?

To: Ferick who wrote (10271)	3/30/1999 8:23:00 AM
From: MeDroogies	Read Replies (1) \| Respond to of 19079

Great article. I agree with the basic tenets. However, there is alot more driving some of these stocks than what the 3 of them seem to think. I, for one, am beginning to understand it a little better. I will use AMZN as an example, but for other stocks (AOL, for example), there is more to the picture. I am not a believer in the AMZN concept. Volume is not what is the driving force here, and on the internet, branding is key...but is fleeting if someone can trump you on price (particularly in ecommerce). However, AMZN has offered out huge options to its employees, and many of its partners. As a result, some portion of these "future" shares have to be held in reserve to offset a sudden rush to cash in(God forbid that should happen). In addition, the company holds a certain number of its own shares in the Treasury. Likely, there is a ESOP that offers a nice incentive for employees to buy the stock (and tax laws incentivize them to hold it for about 1 1/2 years, hopefully). There is institutional holding, too. Finally, don't forget the employee 401(k)s which are probably overloaded in the company stock as opposed to more diverse investments. All in all, there is a vast reduction in the real "float" as opposed to the listed "float". This creates a supply/demand imbalance and drives prices up. AOL is doubly blessed due to its inclusion on the S&P500 (and soon the DJIA...if rumors are correct). The net result (no pun intended) is that people recognize the birth of a new medium, want a piece of it, and wind up overpaying for it due to slack supply. The volatility is a result of an increase in daytrader activity in stocks that they are more familiar with (who's going to daytrade GE? hardly anyone). Certainly, this isn't the WHOLE answer. But it does go a long way to explaining the overvaluations. Most of these overvaluations are unwarranted, to be sure (I for one think AMZN is ridiculous). Others are not (AOL is about as much a sure thing as I've seen...but if you asked me 2 years ago, I'd have said something else). One thing is sure: should the day come when confidence in some of these companies is lost...the walls could come tumbling down. LYCOS' crash didn't do it because it lacks cachet, and everyone recognized the deal as lame. But somebody (probably AMZN) is going to fall short one day. ORCL, on the other hand, powers most of these guys. They are much needed. No matter what, ORCL stands to gain.