Stick with his program. In my opinion, the correction is over. We’ll see good earnings reports in April, especially for technology companies. Buy market leaders like Intel and Cisco Systems and Microsoft. All were up by week’s end and should come back fairly quickly.
Yeah. NASDAQ stocks generally lead a downturn-most technology companies are listed on NASDAQ-just as they lead an upswing.
I don’t understand the hullabaloo. Can you imagine a more frivolous way to spend billions, hooking up people’s homes so that kids can compete playing Marioworld? The Information Highway is a buzzword, created by public-relations people and folks at the White House who want to be seen as technology visionaries. To me, it doesn’t mean anything.
Pure, unadulterated bull. Do you really think anyone is going to “interact” with “Casablanca,” maybe change the ending where Claude Rains walks off with Humphrey Bogart? No way. Are we going to order pizzas “interactively”? Buy zirconium electronically and watch idiots talk about gemstones? No. We already have a way to “interact” with the world. It’s called the telephone.
The reality is that it exists, today. It’s called Internet, bazillions of computers linked via telephone all around the country. It works fine. And it gets bigger every day. The Information Highway isn’t some futurist fiber-optic infrastructure to be constructed over the next decade. It’s past tense. The future is here, now.
That’s because of the mentality of the people who run those companies, particularly the telephone monopolies. They want to grow. They want to get into unregulated industries, including entertainment. Movies over the phone lines. Mega-billion-dollar mergers. They’ve been seduced by Hollywood.
Look at other industries that were massively deregulated, where companies started screwing around in businesses they didn’t understand and had no experience in. The airlines. The savings and loans. Now you have wreckage everywhere. Why will it be any different with the phone companies? Ten years from now, there is going to be a lot of embarrassment over who wrecked the telephone companies.
Rhetoric. What difference would it make? Is there a new product? No. You have what you had before. Why bother?
Let’s think about the industry. Point one: look at the Japanese. They’re not worrying about ordering pizzas or watching five movies a week. They’re building an Information Highway linking companies, so they will become more powerful in international business. Few people here are focusing on business applications like that. No one’s talking about how to connect General Motors to Hughes, so that their tens of thousands of employees can exchange information and work together better. But that’s the real market. Business, not consumers. The office, not the home.
Point two: I’m with Andy Grove, the head of Intel, and others. I believe the computer, not the television, is going to be the “box” at the end of the pipe that is the Information Highway. The PC will be the tool people use to “interact” with one another, not the TN. And the Information Highway is going to be made of copper, not glass. It will be built on existing telephone lines. New compression technology will carry all the audio and visual data we need. We don’t have to build more infrastructure; we don’t have to wait. The Information Highway is here. Most people don’t recognize that. If you subscribe to these assumptions, you do not invest in guys who are building “infrastructure,” or who are flirting with Hollywood and movies on demand. You might even sell those stocks. instead, you invest in guys who can ride the highway, as it exists. Look for companies supplying stuff that we can use now.
One is Cisco Systems, a large “internetworking” company. Cisco creates the software that links networks of computers with other networks. Communications and connectivity are the cornerstone of the Information Highway, and Cisco is at the center of it. So are Synoptics Communications, Cabletron and 3Com. So is Novell (a leading networker, which recently announced it would acquire WordPerfect). Its stock is down, around $17 right now. But Novell is a terrific brand, an established market leader. To me, it is a buying opportunity.
Obviously, Intel and Microsoft. Companies that dominate in databases and managing large masses of information, such as Oracle, Sybase and Informix. Among personal-computer manufacturers, the big three will be Compaq, Apple and IBM. They will dominate for the balance of the decade. In software, Lotus and Novell will continue to challenge Microsoft.
I don’t think the government should screw with it. Microsoft is a national resource, the same as IBM was 20 years ago and GM was 30 years ago. Let it alone. just let it be a great company.
After all, Microsoft will implode at some point, as every technology company does in time. Management gets old. They stop listening. They get concerned about the “vision” of their company or their place in history. Then they crash, and new companies come out of the woodwork. That’s my world. Getting them out of the woodwork.
May I promote ourselves a bit? We’re bringing out a new company, C-Cube Microsystems, a leader in video compression technology. [Valentine is chairman of the board, Sequoia holds 1.2 million shares, or 10 percent, of the company.] Essentially, it allows you to send high-quality audio and visual signals over existing telephone lines, copper as well as fiber. It’s key to the highway. The initial public offering comes in mid-April.
Dell, for one. It’s a turnaround company. [The Texas-based computer maker recently took a beating on a lackluster line of laptops.] You would invest only if you want to speculate. To illustrate the dangers of not going with a market leader, in this climate, consider a company called Media Vision. Six months ago it looked like Microsoft 11. Its stock had gone from zero to $50. Now it’s at $10. [The reason: Media Vision manufactures a PC audio card that has been bypassed by the industry.] Your average investor would have bought high, and been stuck with it.
The key, again, is to go with leaders. The industry is going through a major consolidation. Prices for hardware and software are falling. Lots of mergers and alliances. Lots of change. You should therefore invest in established brands, market leaders who have survived a consolidation or are likely to win in a shakeout.
We haven’t invested five cents in pen-based computing. It doesn’t work. Newton doesn’t do anything. I mean, it competes against a wooden pencil and a paper pad, for god’s sake.
Voice is different. It will be a competitive reality next year. You will be able to call your computer and speak a message or letter into it. It’s all part of a progression, making computers easier to use. We’ve gone from the keyboard to the mouse to graphic “icons.” What will be next? Voice, not the pen. Unfortunately, I don’t know of any public companies to invest in. Yet. Remember, what is happening out there in technology is happening very rapidly. You have to be cautious about the stocks you own and buy, so that you don’t run into too many disappointments, too many Media Visions.
Look. There are four buildings here at 3000 Sand Hill Road. In these four buildings there’s a billion dollars, cash. Now, I’m not sure how many good ideas exist in Silicon Valley, or on the planet. But a billion can finance them all. The problem isn’t money; it’s the scarcity of good ideas.
