Follow the Money – Stevie's Toy Box
The Web extortion field Since I'm on the subject of IPO candidates and the pending comeback of Steve Jobs, I might as well finish the whole story.
I recently stopped in to see Jobs at his day job at NeXT Computer (415/366 0900) in Redwood City, California, and to check out a Web demo I saw him flash one night on CNN. Jobs showed me a mock-up website his team built to get Chrysler's attention using NeXT's WebObjects development environment, currently in beta. One of the coolest features of the site is its ability to search for all Chrysler vehicle data you ask for, such as car color and price, and then automatically create a customized webpage for you to browse. Jobs calls this "dynamic publishing," and he promises WebObjects will be commercially available by the first quarter of 1996. Just to make sure I wasn't falling prey to Jobs's infamous "reality distortion field," I ran what I saw by a couple of Netscape sales reps who had dropped by my office; even they seemed impressed.
In investment banker-speak, NeXT's WebObjects is a potential "growth opportunity." In 1994, NeXT concluded its first year as a software company with $1 million in profits on revenues of about $50 million. When you add up the potential of WebObjects and the soon-to-be released OpenStep for Windows (NeXT's new object-oriented application development environment), it looks as if NeXT may be starting to roar. When I asked Jobs about IPO plans, he wouldn't comment, but with Hambrecht & Quist CEO Daniel Case on his board, we know he's getting solid advice. Hambrecht & Quist (415/576 3300) also happens to be handling Jobs's Pixar IPO.
I think we'll see NeXT go public in early 1996. And what does Jobs think of computerdom's new boy wonder, Marc Andreessen, the 24-year-old co-founder of Netscape? "He's smart, but young, and he has Microsoft to deal with."
Uncle! Uncle! OK, I'm finally going to cry uncle on my Microsoft short. The lessons learned from my long, sad, journey betting against Microsoft are as follows: When I first shorted Microsoft's stock a year ago at 60 3�16, I was too damn early. When I shorted Microsoft again in July, I had the right idea. At the time, the stock was trading at 90 15�16, and it eventually hit a low of 80 3�8 in early October. That's when I should have called my short.
By early November, Microsoft's stock had soared back to 95 – the growth was based on news that the company's profits ballooned to 58 percent in the quarter ending September 30 (10 percent above forecasts), and sales increased by a whopping 62 percent. Microsoft also estimates sales of 7 million copies of Windows 95, far outstripping analysts' predictions. This will, of course, have a positive rippling effect on its application-software business. So, I'm going to cut my losses, cover my short, and not look back.
The apple of my eye If you thought my Microsoft shorts were stupid, you'll probably stop reading this column entirely when I tell you that I loaded up on Apple stock this month. Here's my rationale: in Apple's fourth quarter, which ended September 30, its net earnings fell 48 percent because of the company's inability to fill orders. In sum, Spindler and company severely underestimated demand for the Power Mac and were late getting the new PowerBooks to market. Demand for the Macintosh has never been higher. Having an almost $1 billion backlog is the kind of problem all companies wish they had. And even with all its troubles, Apple reported that Macintosh shipments grew 25 percent over its fourth quarter. According to Dataquest, Apple's worldwide market share is up to 9 percent from 7.4 percent for the previous quarter. My guess is that Spindler will do whatever it takes to gear up the company for the best Christmas season in its history.
I think Apple is a steal at 36 3�8 a share. To finance this buy and to cover my Microsoft short, I'm selling Cisco Systems – I think the stock has topped out for a while.
The Wired Interactive Technology Fund (TWIT$)
Company | Primary Business | Symbol | Shares | Price Nov 1 | Since Oct 2 | Action
Mobile Telecommunications Technologies Corp. | Mobile computing | MTEL | 3,300 | 28 5�8 | – 1 3�8 | hold
Cisco Systems Inc. | Connectivity | CSCO | 2,500 | 80 1�4 | + 14 1�4 | sell
Microsoft Corporation | Software | MSFT | 1,000 | 98 3�8 | + 10 1�8 | cover
Netcom Online Communications Service Inc. | Internet provider | NETC | 15,000 | 63 1�2 | + 20 | hold short
Global Village Communications Inc. | Communications hw/sw | GVIL | 3,800 | 16 7�8 | + 4 3�4 | hold
General Magic Inc. | PDA sw | GMGC | 4,500 | 13 1�2 | – 1 1�8 | hold short
Sun Microsystems Inc. | Hw/sw | SUNW | 4,200 | 76 3�8 | + 14 7�8 | hold
3Com Corporation* | Networking | COMS | 1,900 | 48 | + 4 3�16 | hold
LSI Logic Corporation | Semiconductors | LSI | 4,500 | 46 | – 12 1�2 | hold
Applied Materials Inc.** | Semiconductor equip. | AMAT | 2,000 | 49 3�8 | 2:1 split | hold
The Walt Disney Company | Entertainment | DIS | 1,500 | 57 3�4 | + 3�4 | hold
New Stocks
Apple Computer Inc. | Hw/sw | AAPL | 4,800 | 36 5�8 | buy
Portfolio Value | $1,352,656.25 | (+35.27% overall) | – 15.05%
*On August 28, 3Com Corporation underwent a two-for-one stock split which was not reflected in that month's TWIT$ portfolio.
<p> end: This fund started with US$1 million on December 1, 1994. We are trading on a monthly basis, so profits and losses will be reflected monthly, with profits reinvested in the fund or in new stocks. </p>
Irmation provided here is based on a combination of insights and gossip overheard cruising around the Goldman Sachs conference in New York, hanging out at the Hollywood premiere of To Die For, and listening to William Buckley and William Hearst III banter at the Herbst Theater in San Francisco.</p>
TTWIT$ fund is a model established by <em>d</emt an official traded portfolio. <em>d</emders who use this information for investment decisions do so at their own risk.</p>
<ony B. Perkins (<a h@herring.com</a> editor and publisher of The Red Herring (<a h://www.herring.com),</a>,)onthly investment magazine.</em
