Post of the Day
December 22, 1999
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why i2 is (now) a core holding for me
Even if i2 stock is a bit overheated at this moment, I plan to hold through the downs and celebrate the victory a few more years down the road. This has become a core holding for me, joining Oracle, Cisco, Sun, Intel, and Microsoft.
For me a core holding
a) supports the forces at work on corporations
b) has proven intelligent, visionary leadership
c) is something I understand and come into contact with
a) There are (at least) two forces that suggest that we will see a generally bull market for another 5-10 years: baby boom demographics and the information economy.
There is a compelling graphic in the current issue of LA Magazine (don't laugh; OK, laugh some) that shows how the baby boom generation (born 1946-1964) will keep the investing pool rising for another eight years, and how the DJIA has tracked that demographic-based number for decades, with some lag. I have maintained that until the leading edge of the baby boomers hits 60 (2006-1946 = 60) there will continue to be a pattern of people putting money into retirement accounts and generally investing for their golden years. Around that point we will see some of the baby boom lifting from retirement accounts and some adding ... the dynamics will change.
The other phenomenon is the continuation of the information economy. Today the hot words are eCommerce and eBusiness. But it goes deeper, from the knowledge worker class to the proliferation of desktop computers and mobile phones. One of the brightest new industries is biotech, and their research is hugely based on information technology: databases, algorithms, simulations, and automated experiment systems. Little to do with eCommerce and eBusiness. There is more to the information economy than the current buzzwords.
More money to invest and a transition of further aspects of business to the information economy.
i2 supports this because at least 25% of the world-wide GNP is in manufactured goods, which means supply chains. As quick information gathering and exchange becomes possible, one can apply algorithms to reduce the wasteful time and quantity values, and improve the processes.
Also, improved ability for businesses to interoperate will allow companies to outsource more, to focus on core competencies more. Generally will improve efficiencies, if the virtual corporation can operate as efficiently as the single corporation. I see i2 as a player in this as well, however it occurs.
b) In a changing and competitive world the companies who will succeed are those who are close to the leading edge of trends, who can see a bit past the horizon, and who are willing to do the right thing across the entire corporation. Also companies that understand the propositions so well that their own companies are exemplars of the brave new world.
i2 has made their corporate goal one that reflects delivered value to customers. They have based their product architecture on flexibility. They have weathered numerous competitors and continued to push forward.
c) I wish I knew more of the retail process firsthand - not just as a buyer. As a buyer I do not see any branding whatsoever in a store that sells commodity goods, and thus see no branding in WalMart or Amazon.com. The branding is in those products, in the book authors, and so forth. I will go looking for the authors I like, and buy their book (same book) wherever I can get a good price.
And yet an Amazon.com was a great investment, and may well be into the future. But since it is one I don't understand and touch regularly, I avoid putting money into it.
I do know computers, networks, software, and their application to many aspects of business. I do know what is possible, and what the possibilities mean, and can estimate the cost savings, the potential for new customers, the improvement in customer repetition, and so forth. The latest wave is eCommerce (buying over the Internet, in real-time) and eBusiness (exchanging data over the Internet, in real-time). There have been predecessor trends, and there will be successor trends. I see some of the trend lines. I cannot weight them as to which might be most important many years down the road. But I know many will.
So I choose companies that seem to be important in most of the forward scenarios, whose products I regularly touch when I assist companies to move forward, and who are actively moving forward.
Again, i2 fits this. As companies specialize even further, the coherence of the virtual companies (the organization of many companies to fulfill a customers single purchase, for example) will rely increasingly on software that can assist in deciding how the players should play together. I see i2's products in this world.
I hope all who have ITWO shares today will hold a few into the future. When I celebrate that victory, it would be nice to have a team celebration.
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