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2HRS2GO: Market slow to appreciate some techs

If you ain't hot, you ain't squat.



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Today provides more evidence of market tunnel vision. At least 9 companies posted better-than-expected earnings and strong outlooks yesterday, yet only four rose in today's early trading: Microsoft (Nasdaq: MSFT), Siebel (Nasdaq: SEBL), and Broadvision (Nasdaq: BVSN). Meanwhile the likes of C-Cube (Nasdaq: CUBE), Lightbridge (Nasdaq: LTBG), RealNetworks (Nasdaq: RNWK), Teradyne (Nasdaq: TER), and Xilinx (Nasdaq: XLNX) have seen profit-taking, outright selling or hardly any reaction at all, at least this morning.

Positive sentiment for the first three is easy enough to understand. Microsoft is Microsoft; if you don't know what that entails, you must have stumbled across ZDNet by accident, and I'll let you go on your way. Siebel commands the leading position in a very rapidly growing field, front office (or "customer relationship management") software. Broadvision has been riding e-commerce hype for months now.

But the other reporting companies aren't duds.

C-Cube also plays in a high growth area, digital video chips. Xilinx's programmable chips largely end up in cell phones and other areas of communications, a market which might have more expansion potential than any other. LightBridge's software and consulting business benefits from the same trend. RealNetworks, the runaway leader in the popular and well-known field of Internet streaming media, not only beat estimates but it also made a profit for the first time. Teradyne keeps racking up orders and profits for its chip manufacturing equipment as the semiconductor industry goes through its first major overhaul in a couple of years.

Rather than focus on upbeat earnings in strong fields, the market prefers to nitpick. Xilinx saw some inventory damage because of Taiwan, but shareholders overlooked the fact that the company also expects no financial impact from it. LightBridge expects a fourth quarter dip in consulting because of Y2K and customers focusing on retail stores, rather than virtual ones; yet the long term outlook doesn't change much, although Prudential did downgrade the stock to "hold" from "strong buy".

It's not as if today's market is buying on the rumor and selling on the news. Yes, some of the aforementioned stocks saw run-ups just prior to their earnings reports, but being ridiculously valued didn't stop people from driving Microsoft, Siebel and Broadvision higher this morning.

Profit-taking isn't a bad thing -- except when there are more good times to come for the company. Some of the laggards mentioned above -- C-Cube and Juniper (Nasdaq: JNPR) specifically -- are actually taking off this afternoon as this sentence is being typed. Yet it's amazing that it took the market until after lunchtime to notice earnings reports that came out yesterday.

Perhaps the companies ought to be happy that they were noticed eventually. But the delay does indicate that people lack interest in anything but the biggest and most overhyped stories. Being a good company doesn't mean anything anymore if you're not a media hog or a hot target.

Other issues:

  • IBM
  • (NYSE: IBM) Big Blue is scheduled this afternoon to report third quarter results. First Call consensus predicts earnings of 90 cents per share. Let me guess what executives will say on the conference call: services are great; software is pretty good; servers getting better but still not up to par with competitors' growth; still committed to PCs and trying to move it toward profitability; shipments of mainframe processing power are up, but not revenue; currency exchange rates hurt; still targeting low double digit percentage growth for overall revenue.

  • America Online
  • (NYSE: AOL) Also has a quarterly report on the calendar for today. First Call's survey of 33 analysts predicts a profit of 13 cents per share for AOL's fiscal first quarter, which historically is the slowest of the year for the online service provider. As with IBM, don't expect revelations from this call -- subscriber growth will undoubtedly be up, advertising revenue should keep rising and no, broadband isn't a threat yet.

  • Sun Microsystems
  • (Nasdaq: SUNW) Scott McNealy's team does a great job, but I remain unconvinced that buying Java application vendors is the best use of Sun's resources. There are plenty of folks already working on applications and development tools, so why does Sun need to jump in? Seems a little anti-competitive to develop an OS and applications for it, don't you think? 22GO>