THE DAY AHEAD: Predictions for 2001
COMMENTARY -- It's prediction time for the stock market and technology issues.
This time a year ago, I predicted that volatility would become a fabric of everyday trading, profits would matter, e-tailers would consolidate, B2B stocks would cool off, Net companies would go brick and mortar and Microsoft would settle with the Department of Justice.
I was on target for most of them. But Net companies didn't go brick and mortar -- they went under. And Microsoft is still in court.
Here's my crack at being a 2001 sage:
1. Investors will employ some healthy skepticism. If 1999 was a freakish bull market, then 2000 was a freakish bear market. The truth is in the middle. The good news is that investors may have learned a lesson -- irrational exuberance doesn't last forever. Investors will shoot for those historical returns around 7 percent and like it.
2. Initial public offerings will look dramatically different. The IPO of 2001 will actually have a shot at being a long-term investment. IPOs will actually have profits, a business model and real sales growth. Of course, you'll get your hype-driven offering (Loudcloud anyone?), but they'll be few and far between.
3. What e-tailers are left will go under. Want to know the future of e-tailing? Look at catalog companies. I spent my holiday shopping looking at catalogs and then going to the companion Web site to order.
4. Regulation FD will become more clear. Under SEC rules, companies can't spoon feed analysts anymore. That means there are a lot more earnings surprises. Companies' initial reaction to the regulations was to clam up. That'll change. At some point in 2001, an exec will get in serious trouble over Reg FD. The good news? Everyone will know the ground rules and information will squeak out again. Those surprises won't be so surprising.
5. Broadband access bust. Every year is supposed to be the year of broadband. Well, here's a switch -- 2001 won't be the year of broadband. My former digital subscriber provider (Flashcom) went bust. DSL enablers such as NorthPoint are struggling. Cable is the vehicle of choice, but performance is spotty or unavailable in some areas. Many folks will still be dialing up.
6. The next PC era. PC stocks may be dead, but the industry isn't. This year will bring massive upheaval. There aren't any compelling reasons to buy PCs. Look for more vendors to pay lip service to "beyond the box" strategies with only a few actually delivering. In this commodity box business look for consolidation and industry exits. A few possibilities: eMachines goes under, Micron Electronics morphs into a Web hosting company and IBM exits PCs to sell Dell boxes. That last one is a long shot to say the least. Who would have ever thought Dell (Nasdaq: DELL) would become a value stock?
7. Yahoo! (Nasdaq: YHOO) buys a content company. In the race to diversify its revenue stream, enhance its portal and possibly charge for services, Yahoo will actually cave in and buy its own content play. The one wild-card? Yahoo's stock price. Yahoo's stock isn't the currency it used to be, but the content crowd isn't likely to quibble.
8. eBay (Nasdaq: EBAY) buys Yahoo. Assuming the above scenario doesn't play out, Yahoo could merge with eBay. The idea isn't entirely far fetched -- especially if Yahoo shares continue to weaken. The big challenge will be making the deal accretive to earnings quickly.
9. Amazon.com (Nasdaq: AMZN) merges with a bricks-and-mortar player. With profits still far away in the future, Amazon will merge with a traditional retailer. The combined entity will be touted as the ultimate in customer service. Returns will be easier and Amazon's Web expertise will be a boon to one of those retailers that still don't get this online thing. Possibilities: Wal-Mart and Target.
10. Fiber optics equipment vendors consolidate. We've already seen consolidation with component makers -- JDS Uniphase (Nasdaq: JDSU) was built by acquisitions. Now look for equipment makers to get merger-happy. With those next-generation telecommunication companies facing funding problems, the demand for whizbang gear may subside. Possibilities: Nortel and Cisco continue to gobble up smaller fish. Potential targets: Corvis, New Focus and even Sycamore Networks.
11. Investors flock to a new stock market. Given the Nasdaq's 2000 tumble and likely first half malaise, investors turn to a new market -- ThePit.com, a site that trades sports cards like stocks. This market is open noon to 8 p.m. Sunday through Friday.TDAIN
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