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

To: Jimbo Cobb who wrote (60487)	5/4/1999 9:09:00 PM
From: rupert1	Respond to of 97611

A Conference of Jimboites. Good news for Jimbo - internuts to do well, profitable companes like COMPAQ and IBM not to do well - I wonder what stocks these guys own, as if you couldn't guess. May 4, 1999 ----- High-Tech Managers Expect Unknowns To Take The Limelight By MARA DER HOVANESIAN Dow Jones Newswires CHICAGO -- Something's got to give in the technology sector: Either earnings have to rise, or stock prices have to fall. Both may happen, say high-tech portfolio managers attending the Morningstar Investment Conference in Chicago. But it will happen on a tiered basis: small- and mid-cap tech and Internet-related companies are going to make gains more spectacular than seen in the past 18 months, they say, and large-cap giants will stumble. "For the minority (of small-tech companies), the earnings dynamics are going to be so strong, it's going to make today's look modest," says Charles Morris, managing director of T. Rowe Price Associates and fund manager for the firm's $4.97 billion Science & Technology fund. Says Paul Wick, J&W Seligman & Co. Inc., "There are a lot of cheap tech stocks, believe it or not ... you'll see somewhat of a broadening." Wick runs the $3.77 billion Seligman Communications & Information fund. Changes in the technology industry, such as the production of low-cost personal computers and increased competition, will ultimately hurt companies such as Hewlett-Packard Co. (HWP), Compaq Computer Corp. (CPQ) and International Business Machines Corp. (IBM), says Wick. Though the changes are a "thorn in the side" of Intel Corp. (INTC), the chip maker's ability to keep average selling prices level with "very expensive server offerings" buffer the company from any immediate impact. Big Gains Expected For Small Companies Small- and mid-cap companies in the semiconductor, chip and software business are positioned to make some of the biggest gains, say these managers. Companies on Wick's buy list include Check Point Software Technologies Ltd. (CHKP) and Synopsys Inc. (SNPS), both of which registered double-digit losses in Wick's portfolio year to date, according to Morningstar. Given the upside potential these companies present, Wick still says the stocks are "steals you just don't see." Wick has also made a few plays into the private sector in the hopes that the company will blossom in the capital markets in the future. A $5 million investment into the women-oriented community Internet operation iVillage Inc. (IVIL), whose stock debuted in March, is now worth $40 million, Wick says. Investing in technology, however, is far from a sure bet. Morris's investment in Network Associates Inc. (NETA) accounts for a 30% loss so far this year. A "flesh wound, but not fatal," he says. "It's nobody's fault but our own if we don't do well," he says. The best way to gauge values, says Invesco Technology II fund manager William Keithler - especially with Internet companies - is to assess the customer base's ability to generate revenues, for companies such as America Online Inc. (AOL) and Yahoo! Inc. (YHOO). "It's very difficult when you can't make a reasonable estimate of the company's cash flow," he said. The first stock Keithler bought when he took over the $1.31 billion Invesco fund earlier this year was CMGI Inc. (CMGI), a publicly traded venture firm. He "swallowed pretty hard," because the stock had almost doubled in the two months prior to his purchase, but CMGI's "content, community and commerce" rank high in his book. The ability to create lucrative spinoffs - such as Geocities (GCTY) and Lycos Inc. (LCOS) - are an added plus. Keithler isn't all that enamored with enterprise software stocks, such as PeopleSoft Inc. (PSFT) or J.D. Edwards & Co. (JDEC), companies that have stalled recently because the onset of Y2K issues has affected their customer base. "These stocks have been terrible performers for quite some time," he says. "I don't think the fundamentals have stopped bottoming." Morris isn't dissuaded by Adobe Systems Inc.'s (ADBE) recent lack of new products or financial management, and he's also keen on Analog Devices Inc. (ADI) because of their foray into the telecommunications industry. None of the managers was much fazed by EMC Corp.'s (EMC) recent loss of key Hewlett-Packard data-storage business. "I don't think the severing of the relationship is that big of a deal," Wick says. Of the resulting EMC stock sell-off, Keithler says, "It's overdone." - Mara Der Hovanesian; 201-938-2129