Gorillas in our midst

National | High-tech investors go big-game hunting

Issue: "Dr. Laura: Taking static," April 8, 2000

Searching for simians
Want to conquer the stock market by buying pieces of high-tech companies? Then get ready to hunt some gorillas. That's the message of market watchers Geoffrey Moore, Paul Johnson, and Tom Kippola in their bestseller, The Gorilla Game. The simians these guys look for are of the 800-pound variety: growing companies soon to join the ranks of Microsoft, Cisco, and Yahoo. The authors set up a grid for examining companies. The key factor to watch for is what they call a "discontinuous innovation," technologies that promise to change everything around them. Such innovations require people to change their thinking, buy the new thing, and learn how it works. The first cars, computers, and Web directories all fit this model. If these technologies take off, they will "tornado," or burst out of nowhere both on the marketplace and in the stock market. The company that dominates becomes a gorilla; those that fall behind become "chimps." Netscape, Lotus, and Corel are chimps trying to fight the Microsoft gorilla. The Gorilla Game is an attempt to explain the success of past star tech companies and minimize risk for those looking for a long-term investment. With the immense flood of stock information that flows past investors, some grid is simply mandatory. So are there winners in the gorilla game? It's too early to tell. Markets are risky and no one has an easy route to prosperity. At the least, Mssrs. Moore, Johnson, and Kippola have some thought-provoking concepts about how to approach technology as an investment, instead of just a set of tools. New gorilla on the block
On March 24, an empire was eclipsed. Cisco Systems passed Microsoft to become the world's most valuable company. That day, according to stock market valuations, Cisco was worth $579.1 billion to Microsoft's $578.2 billion. Some bet it will be the first company worth more than one trillion dollars. And Cisco only passed GE for the No. 2 slot in February. While everybody has heard of Microsoft, few outside corporations and the technology trade know about the most powerful Internet equipment maker around. Bill Gates's company is all about PC software; John Chambers's company dominates networks that connect computers. Cisco's products are bought not so much by consumers as by Internet providers and businesses. The company has daily sales of $40 million, with 85 percent of orders placed online. So far the antitrust problems that plagued IBM and Microsoft have left Cisco alone. Most of what Cisco makes helps move voice, data, and video from place to place, like the switches that help trains crisscross continents. These are invisible to many users, but they help keep data flowing smoothly, both on the Internet and within offices. As traffic increases, companies buy more equipment, and Cisco gets bigger. That's how the San Jose-based powerhouse passed Microsoft. Cisco employs about 28,000 people. Four years ago, it employed only 5,000, many of whom are very rich or soon will be. At a Silicon Valley conference in February, Mr. Chambers said that the tech business is constantly overhauled and that many of today's leaders might not be around in 10 years. "It's going to come down to simply who executes the best," he said. "It won't be the big beats the small or small beats the big. It will be the fast who beat the slow." E-envy
There's a nasty new high-tech buzzword-and it's swarming around the Washington beltway, not Silicon Valley. The phrase is "digital divide." President Clinton defined it in a March speech as "a gap between those who have access to Information Age tools and the skills to use them and those who don't." He said this split will "deepen divisions along the lines of race, income, education level, and geography," and that bringing "digital opportunity to all Americans" is a major goal of his administration. To show what a big deal this is, the Commerce Department built a website at digitaldivide.gov to hash out the issue. But is this a real problem? According to a telephone poll conducted last fall by the financial news site CBS.MarketWatch.com, about half of us have no Internet access. But considering that home Internet access scarcely existed before 1994, this is a pretty quick adoption rate. The Net only recently achieved mass-market status, so there is plenty of growing time. But proposals to bring Internet service to low-income families may come soon anyway. There are already numerous efforts to convince companies to donate computers and equipment to schools and other institutions. Yet this will duplicate the efforts of online services, who are bending over backwards to gain market share. Those AOL signup disks have been falling like rain for years. Some companies give away accounts just to get eyeballs for advertising. Others have even tried giving away computers! The Net is like television and radio. It will soon be almost universal with or without government help. Look to see the "digital divide" become increasingly discussed as it becomes increasingly irrelevant.

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