Meeker: Tech rebound will take some time
The controversial stock picker says the industry is groping at the bottom of an economic trough and is unlikely to rebound for at least six to 18 months.
Meeker, who spoke to hundreds of Internet and software executives gathered at the three-day Industry Standard Internet Summit here, mirrored the downbeat attitude at the conference. Several other speakers, including Kleiner Perkins Caufield & Byers general partner John Doerr, predicted a turnaround would not come until the middle of next year--at the earliest.
Doerr, Meeker and others were also quick to mention the significant amount of "pain" that New Economy companies will have to shoulder between now and the rebound.
A blunt-speaking, unpretentious Indiana native, Meeker was among the most influential and controversial technology analysts in the late 1990s Internet boom. Barron's named her "Queen of the Net," and The Wall Street Journal put her in the same category of market movers as Alan Greenspan and Warren Buffett.
But she has come under considerable fire from investors and the financial media in recent months for her unfailing optimism about stocks such as Amazon.com, which has fallen from its peak of $113 on Dec. 6, 1999, to $16.03 at the close of trading on Monday. In a particularly scathing report in May in Fortune magazine, journalist Peter Elkind critiqued her for not downgrading Amazon, Priceline.com, Yahoo and FreeMarkets, whose stocks declined between 85 percent and 97 percent from their 1999 and 2000 peaks.
Although Meeker did not want journalists attending her Internet Summit presentation to quote her directly, her financial presentation painted a picture of an industry that is feeling the same squeeze that all industries experience during the trough of economic cycles. She compared the Internet frenzy to the California Gold Rush of 1849 and the invention of the automobile in the 1880s, predicting that an elite group of technology companies will soon dominate the entire segment.
Her top picks for the user-interface category: AOL Time Warner, Microsoft and Yahoo. Her e-commerce winners were eBay and Amazon. Her infrastructure winners were VeriSign, Cisco Systems, Sun Microsystems and Dell Computer. In the specialist market, she picked travel site Expedia; technology information provider CNET Networks, publisher of News.com; real estate and home improvement e-tailer Homestore.com; and interactive advertiser TMP Worldwide.
Meeker also said that perhaps the greatest danger of the economic malaise is that it could stifle innovation. "The biggest risk we all face is not being willing to continue to take risks," one of her slides read.
Here are other highlights of Meeker's by-the-numbers report, which is based on Morgan Stanley research:
• 2005: The year when nearly 50 percent of homes in the United States will have broadband Internet access.
• 5: The percentage of technology IPOs that created 90 percent of the technology sector wealth in recent years. The moral: Few start-ups win big.
• 4: The average number of "ten baggers" per year since 1980. Ten baggers are companies that have an IPO and a tenfold rise in the stock price within one year.
• 81: The percent that Oracle stock fell in October 1990, when the stock bottomed out at 13 cents per share. Since then, it has surged more than 14,000 percent--despite the downturn.
• $730 billion: The amount of market capitalization loss--dubbed "wealth destruction"--brought about by the declining stock of 362 Internet-only companies that Morgan Stanley tracked from Dec. 31, 1999, to July 12.
• $730 billion: The amount of wealth destruction brought about by the declining stock of 26 non-technology companies in the Standard & Poor's index that Morgan Stanley tracked from Dec. 31, 1999, to July 12.
• 69: The percent of all technology venture funding in the past 25 years that came in 1999 and 2000 alone.
• 40: The average number of IPOs per year in the United States from 1980 to 1994.
• 191: The average number of IPOs per year in the United States from 1995 to 2000.
• 318: The total number of IPOs in the United States in 1999 alone.
• 20: The number of technology IPOs expected in 2001.
• 23: The percentage of year-over-year growth in total U.S. spending on information technology in 2000.
• 3: The number of years since 1960 when total U.S. spending on information technology topped 23 percent year-over-year growth.
• 81: Percentage of time that American AOL users spend on instant messaging, chat and e-mail.
• 300 million: Total number of Internet users in the world today.
• 13: Estimated percentage of American households that will have broadband Internet access at the end of 2001.