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

To: JMD who wrote (1367)	4/28/1999 9:24:00 PM
From: Caxton Rhodes	Read Replies (1) \| Respond to of 5853

Surfer Dude- This is an interesting article on fiber cos. moneycentral.msn.com Caxton

To: JMD who wrote (1367)	4/28/1999 9:49:00 PM
From: SDR-SI	Read Replies (1) \| Respond to of 5853

Mike, I don't know that I am really qualified to speak in any but the most primitive, naive and qualitative way on the "philosophical network" about which GG and others are making us think, and a lot of my "physical network" experience goes back to such ancient museum pieces as relays, switches, vacuum tubes and wire made from strands of metal, but I can offer a few observations that have come into my mind from thinking about the concept: First, within the realm of the physical implementation of the information-carrying aspects of the network, it would seem that the better long term investments would be those companies whose approach is centered around flexibility - companies who are investing in the pipelines themselves and who are doing it on a large enough scale and on a fast enough track so that when the inevitable downward revenue push comes, they will have already made the commitment to facilities and can then concentrate on improvement and technology perfection. (LVLT, for example). But because there is a lot of "present" before we get to the "future", I also think one must look at those companies that have or are implementing networks and have demonstrated outstanding adaptability and flexibility in their business and operational practices (WCOM, NXLK, for example). Second, since it will take a lot of very smart equipment to make the network capable of being dumb, it would seem that we should be looking for those equipment and systems companies that will be in the forefront of such developments (EMC, LU, CSCO ???). Third, if we believe that capability will become distributed and that capability will move to the edges of the network, we should look at companies that provide such capabilities and who have demonstrated that they can move their area of endeavor a giant step forward (EMC, Wegener, emerging set-top box or information appliance makers, etc). Fourth, we should look at the facilitators and the protectors of the network and its economy - e-commerce, security and control systemizers (hardware and/or software) such as Wave Systems and others, many yet unknown. Fifth, we should look at the content providers and service providers who will profit from the capabilities of network. And sixth, seventh, etc. we have to look at each piece of where the evolving network is pushing and get into those areas when we figure out what they are. Regarding the first group above (and actually all the groups), IMHO that one must maintain a high degree of investment agility, and that the intent should be to ride the wave of ingenuity, entrepreneurship and acceleration, but that when the company becomes set in its ways or "utlityized", hope that you can see it enough in advance to get out and move into the new leadership companies. All of that is easily said, of course, but really hard to do. Its especially hard to have done very well with a company's stock and be able to see that the peak (whether it be technological or financial) is past. I guess the other important thing is to try to establish the mindset that if you are trying to work at the crest of the wave, you are going to be wrong some non-trivial percentage of the time, and that you have to be prepared for the associated losses. Human nature, however, inevitably keeps that goal from becoming a mature reality. I'm sure others can offer more exhaustive and quantitative views on how to convert the view of the future into $$$, but the above is what I think I'm trying to do in most of my investments. Apologies for the length. Steve

To: JMD who wrote (1367)	4/29/1999 8:10:00 PM
From: Morgan Drake	Read Replies (1) \| Respond to of 5853

OK. I'll take a shot at showing you the $$$. Let's take hospitals as an analogous situation. I take my kid to the hospital for xrays because I suspect he might have fractured his arm. The hospital bills me $400 for 1 hour's time and 4 xrays. Now I say wait a minute, no way did that procedure cost $400. So what's going on here? Well, in my opinion what is going on is that the marginal cost of the treatment was probably less than $50. The other $350 turns out to be an allocation of the hospital's annual fixed overhead to my kid's visit. Think about it. The plant, the staff, the insurance, etc., etc. It's gotta be recovered somehow. My guess is that the big fiber players will end up charging a flat monthly rate like AOL. That's how they'll recover their fixed costs. That also will probably be how prospective new entrants will be deterred. They won't be able to get financing to lay billion dollar underseas/underground cable. Additionally, all the easy rights of way (rail, power lines, gas lines) will have been taken. I guess that's why there haven't been any new national cable companies in quite some time, or regional/local ones for that matter. Rest assured that if the cable tv model produces good cash flow, the big IP fiber guys will figure an analogous way to may money. Morgan