Special Features The Winners of 1999

By Paul Larson, Bill Mann (TMF Otter), Rick Munarriz (TMFBreakerRick), and Matt Richey (TMF Matt)

(Dec. 21, 1999) -- San Diego based Qualcomm (Nasdaq: QCOM) had been a fairly solid performer for investors through the first half of this year, but it has been on an absolute tear since it won a court case against Ericsson (Nasdaq: ERICY) that found Ericsson in violation of Qualcomm patents. For the year, Qualcomm has returned gains in excess of 1100% to its shareholders. There are reasons beyond the court case to believe that Qualcomm will justify the lofty expectations placed upon it. First, the company holds the patent for Code Division Multiple Access (CDMA), a digital wireless protocol that is the most friendly for data transmissions (i.e., the "wireless Internet"). Whereas three years ago Qualcomm was alone in its belief of CDMA's superiority, it now has converted some of the biggest wireless players, including Sprint PCS (NYSE: PCS), and Nokia (NYSE: NOK). The company is currently valued in excess of $64 billion on 1999 projected sales of $3.9 billion. Up 1701.9%

As Pikachu and Jar Jar Binks duke it out for "Most Overexposed New Character" bragging rights, the Pokemon set has been the big winner of the 1999 holiday season. As shelves get cleaned out of Pokemon toys and trading cards, only to get restocked to repeat the process, no company smiled wider than 4Kids Entertainment (Nasdaq: KIDE). As the licensing agent outside of Japan for Nintendo's runaway $5 billion hit, 4Kids has been a royalty generating powerhouse. With the franchise licensed to more than 90 domestic makers of everything from bed sheets to vitamins, 4Kids generated earnings of $0.54 a share in the third quarter alone. With more games and characters slated for the new year, will the momentum continue? Gotta Catch 'em All, you know. Up 856.3%

Investors bid up the shares of wireless communication providers in 1999 in anticipation of big growth for new types of wireless offerings -- such as Internet and e-mail services -- in the coming year. One of the beneficiaries of this move was Nextel Communications (Nasdaq: NXTL), whose shares have more than quadrupled in value over the past year. Back in May, software giant Microsoft (Nasdaq: MSFT) announced plans to invest $600 million at $36 per share in the company. In exchange, Nextel will provide its more than 3 million customers with access to a customized set of Internet services offered through a co-branded version of the Microsoft's MSN portal. Nextel's revenues are growing at a 75% clip, but the company is without profits. Interested investors should also take note of the substantial debt -- in excess of $8 billion -- that Nextel lugs around on its balance sheet. Up 292.3%

Internet infrastructure companies have been considered a "safe" way to invest in the growth of the Internet during 1999. One such company, JDS Uniphase (Nasdaq: JDSU) has provided its investors with an incredible seven-fold increase in the value of its shares over the past year. In June, JDS FITEL combined with Uniphase to form a company with $588 million in combined revenues over the past year. JDSU is a leading supplier of optoelectronics to the fast-growing optical fiber-based communications industry. JDSU's products are expanding the bandwidth of the Internet by splitting light along a strand of fiber into different colors (similar to the way that a prism splits light into a rainbow). Splitting light into more colors allows more differentiated light -- and thus, more information -- to move through the wire. Without any debt, JDSU's revenues are increasing at a 50% rate, and profit margins are better than 20%. Up 635.9%

Sun Microsystems (Nasdaq: SUNW) put the dollar in dot-com during 1999, as shares nearly quadrupled for the company that runs an estimated 80% of Internet backbone traffic, according to Goldman Sachs. Sun's high-end UNIX-based hardware and services offerings have been in high demand thanks to the surge in Internet development and connectivity. The shift to e-business is clearly playing into Sun's core strengths of industrial-grade computing and the services to put it in place. Revenues topped $12 billion this past year and growth has accelerated to 25%, up from a 17.9% average annual pace over the past five years. Further, profits are growing even faster as net profit margins have expanded to better than 9%. Up 247.7%

In the world of high-performance computer hardware, Fibre Channel has been one of the hottest "buzzphrases" of 1999. Not surprisingly, Ancor Communications (Nasdaq: ANCR) has also been scorching hot as one of the leading producers of Fibre Channel switches. After a terrible year in 1998, Ancor has in 1999 come roaring back with some fairly impressive revenue growth and narrowing losses. Between the improving financial picture and rampant optimism about Fibre Channel's future, Ancor has seen its shares go from $4 at the beginning of the year all the way to just shy of $95 in early December. Up 1956.3%

Interleaf (Nasdaq: LEAF) is one company that has turned the market's excitement over XML into $$$. XML is a computer language that allows programmers to describe data more accurately. Some industry watchers think that XML may eventually displace or at least become as equally popular as HTML -- the current language of the Web. With Interleaf's focus on the hot, new XML language, the stock has been bid up in anticipation of a brighter future, going from a split-adjusted $2 to just short of $50 a mere 10 months later. The stock has cooled a tad in recent weeks, but Interleaf remains one of the market's best performing stocks of the year. Up 1616.4%

After a huge 1998 in terms of shareholder returns for the consumer Internet leaders -- America Online (NYSE: AOL), Amazon.com (Nasdaq: AMZN), eBay (Nasdaq: EBAY), and Yahoo! (Nasdaq: YHOO) -- one might've expected these companies to take a breather in 1999. No sir, they surged in the spring, sold off in the summer, but in the end, these "Internet blue chips" more than doubled in value on average during 1999 as opportunities continue to expand in the consumer Internet space. Here are just a few of the highlights from the past year: AOL signed a big deal with Gateway to expand its membership base. Amazon opened new verticals, including toys, hardware, and Z-shops. Yahoo! extended its number-one portal position by acquiring GeoCities and broadcast.com. Finally, eBay held onto the leading position in auctions despite intense competition from both Amazon and Yahoo! Up 122.4%, 81.2%, 85.4%, and 211.9% Respectively

Is it the Store.com turnkey tech mall? Is it the 13.8% stake in NBC Internet (Nasdaq: NBCI)? Is it a homepage that provides everything from high-tech news to free downloads, auctions to jobs? If you checked off "All of the above," you probably have a good understanding as to why CNET (Nasdaq: CNET) has been on a tear this tech-friendly year. As the online pioneer cultivates some prized domain names like News.com, Search.com, and Computers.com, it has rightfully ridden the Internet's surge in popularity in 1999. Leveraging its hot brand into syndicated television programming CNET has become a multi-layered company -- with every new layer as intriguing as the last. Up 455.9%

Streaming media. Screaming share price. RealPlayer purveyor RealNetworks (Nasdaq: RNWK) has been cashing in on the success of its online media playback software. With more than 85 million users, the company has been generating amazing sales growth through software licensing fees and now through advertising on its Real.com site. Revenues were up 92% over the first nine months of the year and the buzz over how the company can parlay its music delivery download site into a full-feature entertainment destination has kept the optimism streaming. Up 716.4%

Is it a mutual fund? Is it the "Berkshire Hathaway of the Internet"? Call it what you will, but CMGI (Nasdaq: CMGI), the Internet incubator company, is one of the biggest stock market winners in 1999, returning its investors a jaw dropping 786% YTD. CMGI, the Andover, Massachusetts based brainchild of David Wetherell, invests in small Internet companies, helps develop their business positioning, and uses its other invested businesses to match strength with strength. Some of the largest, most successful Internet companies, including Yahoo! (Nasdaq: YHOO), Lycos (Nasdaq: LCOS), and B2B player Chemdex (Nasdaq: CMDX) have been some of CMGI's biggest successes. CMGI is a company that confounds analysts since the majority of its revenues are derived from the one time sale of its investments. The company opened the year with a bang during a highly publicized tussle with Barry Diller and USA Networks (Nasdaq: USAI) over Lycos (from which CMGI emerged victorious). It ends the year equally auspiciously, with a recently announced $1 billion fund to invest in business-to-business companies. Up 734.5%

The Durham, North Carolina company Red Hat (Nasdaq: RHAT) was the first company to capitalize on Linux, the open-source operating system developed by Linus Torvald and improved upon by thousands of programmers, who update and "patch" the program for free. Named for one of the founders' sartorial quirks from college ("Need your computer fixed? Look for the guy in the Red Hat."), the company provides the kernel for Linux as well as programming and operating support for registered customers. The company held a much-ballyhooed initial public offering in August; it's risen 2080% from its offering price, 350% from its opening price. The company received an enormous boost in November when a federal judge ruled that Microsoft was a monopoly. Red Hat is currently selling at 506 times its level of sales. Up 1813.8% Since Going Public on 8/10/99

Returns are through December 20, 1999

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