Clicking on banner ads enables JWR to constantly improve
Jewish World Review April 4, 2001 / 11 Nissan, 5761

James K. Glassman

Jim Glassman
JWR's Pundits
World Editorial
Cartoon Showcase

Mallard Fillmore

Michael Barone
Mona Charen
Linda Chavez
Greg Crosby
Larry Elder
Don Feder
Suzanne Fields
James Glassman
Paul Greenberg
Bob Greene
Betsy Hart
Nat Hentoff
David Horowitz
Marianne Jennings
Michael Kelly
Mort Kondracke
Ch. Krauthammer
Lawrence Kudlow
Dr. Laura
John Leo
David Limbaugh
Michelle Malkin
Jackie Mason
Chris Matthews
Michael Medved
MUGGER
Kathleen Parker
Wes Pruden
Sam Schulman
Amity Shlaes
Roger Simon
Tony Snow
Thomas Sowell
Cal Thomas
Jonathan S. Tobin
Ben Wattenberg
George Will
Bruce Williams
Walter Williams
Mort Zuckerman

Consumer Reports


Even as stocks have fallen, the Net keeps booming

http://www.jewishworldreview.com --
IT’S important not to confuse the fortunes of particular companies with the health of the Internet as a whole. Since March of 2000, investors have trashed Internet-related stocks, tech firms have delivered a series of earnings disappointments and the U.S. economy has downshifted to an anemic growth rate of 1 percent. The news has been horrendous, but here’s the important question for investors: from this point forward, does the tech industry offer a growth opportunity?

To put it another way, despite the troubles of the last year, do you think that people will be using the Internet more or less in the future? In your own life, will you stop using technology because many dot-coms have failed? Will you stop sending e-mail because b-to-c business models were flawed? Will your company abandon the Internet as a communications medium because Yahoo! shares have pancaked?

Not likely. Of course it’s not a pretty picture right now for stock prices and earnings, but the Internet is booming. There’s no other way to describe it. According to semiconductor equipment maker Applied Materials, last year the number of new Internet users worldwide was 100 million. Is there potential for further growth? Consider that fewer than 10 percent of the world’s people are online now and I think you can visualize the upside. And don’t forget that while many particular stocks were propelled by hype, the reality of the Internet’s growth is remarkable. In 1995, according to the tech magazine Industry Standard, there were roughly 100 billion e-mail messages sent worldwide. In 2000, the number reached 2.6 trillion, and forecasts place the number at more than 9 trillion by 2005.

Sure, a lot of these messages are jokes from college roommates and spam ads for online porn, but focus on the productivity that tech tools deliver – being able to share documents and communicate instantaneously, at no marginal cost, with anyone in the world. The ability to shop, negotiate, buy and sell at Internet speed. The Standard reports that the consensus forecast for consumer e-commerce is that this market will grow to $269 billion in 2005, up from $45 billion in 2000. Business-to-business e-commerce is projected to reach $6.3 trillion in 2005, up from $336 billion last year.

Howard Anderson is the founder of the Yankee Group, a technology consultancy, and now manages YankeeTek Ventures, a venture capital firm. Writing in the current issue of Forbes ASAP, Anderson reports: “Despite the gloom in the financial market, curiously enough, the Internet has never been healthier. But it’s never been harder to be an Internet startup. Think of sperm swimming upstream. For all but one of them, it’s going to be a very bad day.”

Anderson says that venture money continues to fund the little companies that will challenge existing ways of doing business, which in turn will force established companies to react with more spending on technology. Sure, a lot of the new companies will die, but they will force changes that require ongoing investment in tech products. Says Anderson, “We in the venture industry are reloading. As they used to put on bumper stickers in Houston, ‘Please, Lord: Give us another oil crisis. We promise not to screw this one up!’”

The continued boom in the use of the Internet suggests that the Net economy will continue to drive changes in business practices. So tech investors may have a rare opportunity to buy shares in what Anderson calls the “Arms Merchants” of the Internet economy – companies like Cisco (CSCO), EMC (EMC), Sun Microsystems (SUNW), and Oracle (ORCL). In our competitive, high-tech economy, with continuing challenges from upstarts, large corporations will likely turn to these companies to maintain the edge. “No one wants to go to war with obsolete weapons,” says Anderson. And no long-term investor should do without an arms merchant or two in his portfolio.


JWR contributor James K. Glassman is the host of Tech Central Station. Comment by clicking here.

Up

03/28/01: Where’s The Profit In Biotech Future?
03/22/01: The Joy of Debt: The last thing we should want is a U.S. Treasury flush with cash
03/19/01: 'Defensive' Stocks in the NASDAQ
03/15/01: Bush administration must say no to Jane and Kyoto
03/08/01: Time to buy small caps? Consider these five great techs
03/01/01: Bill’s and Larry’s continued political adventures
02/26/01: Chips on the Dips?
02/23/01: How Tauzin Can Keep His Word And Stop Telecom "Remonopolization"
02/13/01: Consumers, WAKE UP! Middlemen are ripping you off
02/02/01: Publicity-Seeking Politicians and Contingency-Fee Lawyers Corrupt the Law
01/26/01: DoubleClick, eBay And Their Promising Ilk
01/24/01: Will Cyberspace Look Like France or America?
12/27/00: Cut interest, taxes and regulation to save high-tech economy
12/20/00: Close, But No Big Czar
12/15/00: A Down Year? Maybe. But Let’s Put It in Perspective
12/13/00: Clinton’s sorry midnight race into history
12/07/00: Is Telecom’s Future The Bells, The Bells, and Only The Bells?
12/01/00: Money talks and walks in election aftermath
11/29/00: Climate Treaty Deadlock Shows Lack of Consensus and Common Sense
11/23/00: Climate change participants don’t listen to reasons for uncertainty
11/21/00: Will Regulators Create a Recession?
11/14/00: The Election and the Market
10/26/00: Hang on for the long term
10/25/00: On privacy, one size doesn’t fit all
10/24/00: Perish the bearish thought
10/19/00: Beating hunger --- the biggest prize
10/13/00: Way to play biotech
10/12/00: Bush vs. Gore on Technology
10/11/00: Global Climate Scare: Fools Rush In
10/05/00: Avoid the Apple Trap
10/03/00: Goodbye, anti-Microsoft crusader --- and good riddance
09/29/00: Should You Invest in Tech IPOs?
09/27/00: Could technology end airline delays?
09/22/00: Don’t Forget Small Caps
09/20/00: Is the New York Times Rooting for Disaster?
09/13/00: The Best Argument Against Net Regulation
08/30/00: Political Risk in Big Drug Stocks
07/27/00: Tech Dividends
07/25/00: Government Privacy Violators
07/20/00: If I Had to Pick One Tech Stock
07/18/00: Our Favorite Lawsuit
07/13/00: Silicon Valley East
07/11/00: Election 2000: Year of the Investor Class?
07/07/00: Adventures on the Amazon.com
07/06/00:The Difference Between Bill Gates and Larry Ellison
06/29/00: In the Chips
06/27/00: Free market wins in Federal Court!
06/22/00: Wireless Bargains?
06/20/00: Is Your SUV Warming the Planet?
06/15/00: Shopping for Government
06/13/00: Top 10 Tech Stocks
06/08/00: Riding the eBook Wave
06/06/00: "The Last Mile"
06/02/00: Keep Buying!
05/31/00: Who Asked the FTC to Regulate Online Privacy?
05/25/00: "When It’s Time to Sell"
05/23/00: End the "Telephone Tax"
05/16/00: Time Warner Gets a Bad Rap

© 2000, Tech Central Station