During the 1990's and early 2000's, the world witnessed a technology boom as had never before been experienced. Small, innovative companies founded by creative, visionary entrepreneurs became mega-billion dollar corporations with multi-billion dollar market capitalizations. The stories came at us like glorious movie scripts: the hometown nerd rises to super stardom: Bill Gates, Paul Allen, Michael Dell, Larry Ellison, John Chambers and many more newly-crowned titans were appearing in the society pages, as well as the business pages. Technologies were created that simplified our daily lives and enhanced productivity to levels never before thought of. Almost every human being was benefited by new, affordable technologies. Cars, TVs, appliances, PCs, cell phones,and several other products became fun, simple to use and affordable.
Along the way, massive fortunes were made by founders, employees, mutual funds and individual shareholders. Wall Street analysts also gained rock start status--maybe it was being in the right place at the right time.
Then came the nuclear winter for technology in late 2000-2001. Corporations and governments found themselves in the position of assessing what they bought and needing to monetize all these new technology assets. New spending came to near standstill. All of the investment geniuses who made the "easy" money were now facing losses and scrambling for the exits. Investing went back to the rules and principles that we all learned as beginners again.
No question about it: Microsoft, Oracle, Cisco, Dell, IBM, Hewlett-Packard Compaq, Intel and others are great American corporations. They collectively represent a few trillion dollars worth of market cap and multiple billions of annual profits. However, each titan of the 80's and 90's is facing its own issues of trying to re-grow the revenue and earnings base -- trying to recapture the magical secret sauce -- reminiscent of the older baseball pitcher who has lost 4-5 mph off his fastball and is trying to make it work with pitch location and craftiness.
But, investors are looking at the new, emerging group of companies that could dominate this decade and the next.
Newer young bulls include companies like Opsware (NASDAQ: OPSW), a dominant company in the server automation market, Akamai (NASDAQ: AKAM), the leading player in digital media distribution and storage, Google (NASDAQ: GOOG), the search engine leader and changing the landscape of targeted advertising, and Aquantive (NASDAQ: AQNT) with leading proprietary technology in digital media, marketing and advertising services, and many, many more.
The older technology names will have their resurgent growth spurts, but now in fits and starts versus the non-stop linear growth of days gone by. The newer models of Salesforce.com and Opsware are redefining the way customers will spend their precious technology dollars. Gone are the days of the "easy" $5 million order with a 12 month installation schedule layered-in with consulting fees and maintenance costs. Now, it's off the shelf on an as-need basis.
The young bulls will encounter their growing pains and have their various stumbles as they push the envelope to excel and attempt to dominate, but hey, that's what makes a stock market so interesting and fun... sometimes...
For more of Georges' stock ideas please visit Yared Investment Research.
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Reader Comments (Page 1 of 1)
4-19-2007 @ 4:18PM
Victor J. Cook, Jr. said...
This is a very interesting take on the forces behind the question I ask in my post at http://customersandcapital.com/:
"Is Microsoft the IBM of the 21st Century?" Because it provides some clues to Microsoft's bloated selling, general & administrative expenses compared with Google's lean operations.