Harry Newton's In Search of The Perfect Investment
Newton's In Search Of The Perfect Investment. Technology Investor.
8:30 AM Tuesday, February 1, 2005:
The economy is heating up -- judging by the explosion in the number of ventures
floating over my desk that need financing. Neat technologies. Neat stories.
Now I look at them through jaundiced eyes and I ask:
1. Are they local? Can I go visit them and check up on them?
2. Are they in a business I know something about? Can I help?
3. Do they want me, or just my money?
4. Are they prepared to listen? Most aren't.
5. Are they selling something the world really needs? Or just technology
for technology's sake?
6. Do they fit my lifestyle?
Few fit my criteria. I'm saying NO a lot. That's a good word to learn.
Practice saying it several times a day.
More overhyped telecom technologies: What's
with Wall Street believing that pots of gold still sit at the end of each telecom
rainbow. I hate to be a naysayer. But please resist the urge to buy a telecom
service provider or equipment maker. To wit:
1. Long distance is dead. To most of us, it's now free. How can anyone
make money from "free"?
2. The country is long-distance fibered up. We won't have to lay another
piece of fiber between New York and Los Angeles in my lifetime, and that includes
my living until 120 -- a reasonable estimate.
2. Competition is brutal. The cable companies are emerging as major competitors
to the phone companies. If anyone benefits from selling long distance it will
be them. They just get more and more revenue from that one coaxial cable they've
snaked into all our houses. It won't be AT&T or MCI or any of the local fixed-line
phone companies. They are losing their long distance and their local revenues
to the cable companies and independent, i.e. small VoIP companies.
Now to my overhyped
telecom technologies: For starters, try VoIP and WiMax.
Exhibit A is red herring prospectus for a company called Fusion Telecommunications
International. A small broker called Kirlin Securities is trying to raise
$20 million or so for a company that has lost around $50 million in the past
four years and is still losing money. It's been in long distance. But now it's
morphing into bring a VoIP long distance provider, since that moniker will help
it sell shares to an unsuspecting public. Don't fall for it.
Exhibit B is an article in the latest Economist called "Wireless
Internet -- World domination postponed. The prospects for WiMax technology have
been hugely overhyped. To hear some of its more enthusiastic proponents you
might conclude that WiMax, an emerging wireless-broadband technology, was about
to take over the world. WiMax is akin to a long-range version of the popular
Wi-Fi technology that allows computers close to a small base-station to surf
the Internet without wires. Whereas Wi-Fi's range is limited to a few tens of
meters, WiMax can, in theory, work over tens of kilometres, allowing huge areas
to be blanketed with wireless coverage. Hence the claims that WiMax will bring
Internet access to the 5 billion people who currently lack it, or that it will
render expensive third-generation (3G) mobile networks redundant.
however, is that WiMax has been hugely overhyped. Despite claims by several
firms that they are offering WiMax technology today, the actual number of WiMax
devices on the market is precisely zero. That is because the WiMax Forum,
a standards body that oversees the technology and ensures that gear from different
vendors works together, has yet to certify any devices with the WiMax label.
24th it announced that pre-certification testing will begin in July, which means
that the first WiMax devices will be available only at the end of the year,
six months later than expected. So far, equipment-makers can offer only pre-WiMax
or WiMax-ready equipment which will, they promise, be compatible
with WiMax devices when they appear.
The hype is
now giving way to much skepticism about the technology's prospects. I
don't think it's completely hot air, but it won't live up to its early promise,
says Jagdish Rebello of iSuppli, a market-research firm. WiMax, he says, will
chiefly be used by telecoms firms in rural areas, to plug holes in their broadband
In urban areas
WiMax does not make sense, since it will be uneconomic compared with cable and
DSL, argues Kenneth Furer, an analyst at IDC. It's not going into New
York, Los Angeles or London, he says. It is also too expensive for use
in the developing world, at least for the time being, since early WiMax access
devices (which must be fixed to the outside of a building) will cost around
$500; other forms of wireless link, such as mobile-phone networks, will remain
a cheaper way to connect up remote villages.
in WiMax, chief among them Intel, the world's largest chipmaker, believe
the technology will take off when it can be incorporated into mobile, rather
than just fixed, devices. The next version of the WiMax standard, which has
yet to be finalized, will support mobile access, provided the technology can
be made small and energy-efficient enough to fit into laptops and handheld devices.
Alan Murphy, a WiMax specialist at Intel, is optimistic that WiMax chips for
laptops will be available in late 2006 and that they will consume only 10% more
power than today's Wi-Fi chips.
WiMax as a promising source of future growth. Intel chips power a majority of
the world's PCs, and the company dreams of establishing a similar franchise
in mobile devices, a far larger market. Equipment-makers, for their part, are
counting on Intel to deliver: WiMax will become widespread only if the price
of access devices falls, which in turn depends on the availability of cheap,
mass-produced WiMax chips. But Intel has a poor track record in shipping
wireless chips on time. ..."
And now to another
telecom disaster, Brocade Communications. This lovely telecom equipment maker
has just announced that it's restating its results for the last six fiscal
years and its latest annual report won't be filed on time with the SEC.
What's really screwed up the company's accounting is a the vast number of stock
options it's issued as rewards to its management and its employees for superlative
work. And for what? Great stock performance?
Off to Phoenix this weekend:
If you're in Phoenix this weekend, please come to the Arizona Real Estate Investors
Association annual conference at the Phoenix Civic Plaza. www.Azreia.org.
I'm speaking at 8:30 AM on Saturday. If you whisper the magic words, "guest
of Personal Real Estate Investor Magazine," you get in for free. The theme
of the conference is "Real Estate Investing -- Making it work for you."
There are two things I like about Arizona real estate. First, It's booming because
of genuine population growth. Second, they're moving real estate from a transactional
to a relational model, meaning that some vendors are beginning to see their
customers as long-term -- not just deal by deal. Some companies are even emerging
to manage a real estate investor's entire portfolio. We write about this trend
in the next issue of the magazine. I find the trend fascinating.
off to Phoenix:
I'm flying JetBlue to Phoenix. $220 round-trip from New York. Good deal. Good
for me consumer, but not good for me, investor. Fortunately I sold all my JetBlue
shares after it fell 15% from the high it reached after I bought it. Fuel prices
have been hurting JetBlue, viz.:
World's best airline announcements
I haven't been on a plane for a while (a small mercy). Which brought me to the
world's worst (i.e. best) airline announcements:
+ "Weather at our destination is 50 degrees with some broken clouds, but
we'll try to have them fixed before we arrive. Thank you, and
remember, nobody loves you, or your money, more than Southwest Airlines.
+ "Your seat
cushions can be used for flotation, and, in the event of an emergency water
landing, please paddle to shore and take them with you with our compliments."
+ "As you
exit the plane, make sure to gather all of your belongings. Anything left behind
will be distributed evenly among the flight attendants. Please do not leave
children or spouses."
+ And from the
pilot during his welcome message: "Delta airlines is pleased to have some
of the best flight attendants in the industry. Unfortunately, none of them are
on this flight!"
+ Overheard on
an American Airlines flight into Amarillo, Texas, on a particularly windy and
bumpy day: During the final approach, the Captain was really having to fight
it. After an extremely hard landing, the Flight Attendant said, "Ladies
and Gentlemen, welcome to Amarillo. Please remain in your seats with your seat
belts fastened while the Captain taxis what's left of our airplane to the gate.
An excellent reason to winter in Minnesota, or better, to visit
me in Phoenix this weekend. Neat photo.
My wife returns today from three weeks in Australia. She flew Korean Airlines.
Susan's advice: Don't -- unless you love spicy pickled cabbage for breakfast,
lunch and dinner.
This column is about my personal search for the perfect investment. I don't
give investment advice. For that you have to be registered with regulatory authorities,
which I am not. I am a reporter and an investor. I make my daily column -- Monday
through Friday -- freely available for three reasons: Writing is good for sorting
things out in my brain. Second, the column is research for a book I'm writing
called "In Search of the Perfect Investment." Third, I encourage
my readers to send me their ideas, concerns and experiences. That way we can
all learn together. My email address is .
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