Follow the Money – Bandwidth or Bust
Yahoo! for the Web With all this bandwidth at our fingertips, the World Wide Web should soon emerge out of the novelty stage to solidify its position as the foundation for interactive commerce and entertainment. From a public company standpoint, I still feel that Sun Microsystems, Netscape, Macromedia, Oracle, and, yes, Microsoft stand the best chance of staying ahead of the pack. I've already discussed in previous columns why I like Sun's products and Netscape's vision (even though I think Netscape's stock is still dramatically overpriced). I like Macromedia because of its new Web page authoring tool: Shockwave will catch on big time in 1996 – especially since it's now being offered as a plug-in for Netscape's Navigator. On the Oracle front, Larry Ellison was bragging that his company will eventually dominate the Internet server software business. Oracle has released server technology that can handle electronic commerce over the Net, and its existing WebSystem 1.0 is getting good reviews.
After all my previous Microsoft bashing, it may surprise readers to hear me toot Bill Gates's horn, but now Gates has his head screwed on straight – he will, in Gilder's words, "contribute to the triumph of the Internet model." Even Gates's former nemesis, Steve Jobs, makes a good case for Microsoft, pointing out that the company was a fairly late entrant into the software application business back in 1984, and now it dominates that market. "I am not a cheerleader for Microsoft, but it's stupid to think that Microsoft is not going to be a big player on the Web," says Jobs. From an investor perspective, however, Microsoft probably will not top its July 17 peak price of US$109 per share until 1997 or later. The Internet is forcing the software market to become decentralized again, and I don't think Microsoft will ever dominate as it did in the past.
In the private market, there are a slew of hot Internet software companies I recommend watching. Yahoo!, Infoseek, and Architext have emerged as the leading search engine/directory companies. Yahoo! got a boost in 1995 with a big investment from Sequoia Capital. Things looked good for the Sunnyvale-based business until its link was dropped from the top of Netscape's search page in favor of Architext's new Excite engine. The party line is that Architext was willing to pay more for the position, but insiders suspect that Kleiner Perkins, which is an investor in both Netscape and Architext, might have had something to do with the switch.
Based in Palo Alto, Spider Technologies Inc. also shows signs of being a winner. The company has created an impressive visual development tool for building Web database applications and has already cut deals with all the major database software companies in addition to Sun, SGI, and Hewlett-Packard.
Net-workhorses On a final note, I will be buying some stock in Cisco Systems and C-Cube Microsystems this month. I have owned both these stocks before, and, frankly, I sold them too soon. Cisco and 3Com, which I already own, should continue to be the two top performing networking companies, and C-Cube's compression chips should become a key enabling technology for the efficient transmission of video content over the Internet. With insane bandwidth on its way, these companies are in the right position to make a killing.
The Wired Interactive Technology Fund
|
Company | Primary | Symbol | Shares | Price Jan 1 | Since Dec<2 | Action
Mobile Telecommunications Technologies | Mobile | MTEL | 9,700 | 21 3/8 | – 1 | sell 4,700
Netcom Online Communications Service Inc. | Internet | NETC | 15,000 | 36 | – 34 | hold
|
Global Village Communications Inc. | Communications | GVIL | 3,800 | 19 1/4 | – 4 7/8 | sell
| PDA | GMGC | 4,500 | 11 1/2 | – 1 5/8 | hold
|
Sun Microsystems | Hw/sw
| SUNW | 14,600 | 44 3/4 | 2:1 split | sell 7,300
3Com | Networking
| COMS | 3,800 | 48 1/8 | + 5 3/8 | hold
LSI Logic | Semiconductors | LSI | 7,800 | 33 5/8 | – 6 7/8 | hold
Applied Materials Inc. | Semiconductor | AMAT | 4,000 | 41 3/8 | – 5 5/8 | hold
The Walt Disney | Entertainment | DIS | 1,500 | 60 7/8 | – 3/8 | hold
Apple Computer | Hw/sw | AAPL | 4,800 | 32 1/8 | – 5 1/2 | hold
New Stocks
|
Time Warner Inc. | Mass Media | TWX | 2,600 | 38 1/8 | buy
Tele-Communications Inc. | Cable television | TCOMA | 4,800 | 21 | buy
Macromedia Inc. | Multimedia sw | MACR | 1,900 | 53 | buy
Cisco Systems Inc. | Interconnectivity | CSCO | 1,300 | 76 3/8 | buy
C-Cube Systems | Video chips | CUBE | 1,700 | 61 | buy
Portfolio Value | $1,663,706.25 | (+66.37% | + 36.38%
- SUNW stock split December 11; up 6.07% since December 1.
Legend: This fund started with US$1 million
Information provided here is based on a combination of insights and gossip overheard cruising around the Goldman Sachs conference in New York, hanging out at the Hollywood premiere of To Die For, and listening to William Buckley and William Hearst III banter at the Herbst Theater in San Francisco.
The TWIT$ fund is a model established by Wired, not an official traded portfolio. Wired readers who use this information for investment decisions do so at their own risk.
Anthony B. Perkins (tony@herring.com) is editor and publisher of The Red Herring (http://www.herring.com),,) a monthly investment magazine.
