Dueling Fools Enron Around
Bear Rebuttal

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Dueling Fools

By David Langford (wot_dabny@yahoo.com)

As my Bull compadre has aptly pointed out, Enron is positioning itself to be a market maker in the oo-la-la bandwidth market. Two problems: 1) Enron's losing money on it; 2) bandwidth is growing so fast, the day isn't far off when you won't be able to charge for it, let alone make a market. Why?

Optical technology is roughly where computer technology was a decade ago. The difference is that while computing power doubles every 18 months, bandwidth doubles every nine months. As the technology is still young, a single innovation could increase bandwidth 1,000-fold, depending on what is discovered, such as a more perfect mirror. Scientific American recently described the whole thing. Here's my favorite part:

"Lucent estimates that... the world will have enough digital capacity by 2010 to give every man, woman and child... a 100-megabit-a-second connection. That's enough for dozens of video connections...."

With bandwidth supply becoming effectively infinite, Enron will have only the ugly stepsister business: energy.

I rest my case.

Still here? Well, since you stuck around, I've got two more words for you: fuel cells. A home fuel cell will power your whole house for less than you're paying now, and you'll never lose power again. (Those of you in the country, or in California, please stop drooling.)

The next generation will be indoor, heating your water and saving even more money. Pollution? The first generation is way clean, the next generation puts out only heat and pure water. General Electric (NYSE: GE) will be selling the first units within a couple of years, and Ballard Power Systems (Nasdaq: BLDP) will be supplying the fuel cells for millions of autos shortly thereafter.

Neat, huh? Enron is already making deals with fuel cell makers to power new plants -- but why have an expensive, cumbersome, unreliable infrastructure when you can make your own power at home? Who needs stations, cables, poles, transformers, blackouts?

A successful technology business designs or manufactures, it doesn't broker. In making markets, Enron has positioned itself to be made obsolete by the very technological advances it depends on. Its position in the energy market is no less shortsighted. Paul may think Enron's a castle, but I think it's going to burn down, fall over, then sink into the swamp.

A former swashbuckler and a one-time fussbudget for the FBI, David owns no shares of any energy or utility company, including Enron, nor does he ever plan to. You can see all of David's personal portfolio holdings under Favorite Stocks here. The Motley Fool is investors writing for investors.

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