Boring Portfolio

Down Under
Wednesday, May 27, 1998
by Greg Markus (TMF Boring)

SYDNEY, Australia (May 27, 1998) -- A glorious red sunrise is spreading across the Manly Beach horizon as traders head home from Wall Street half a world away. The net asset value of the Boring Portfolio appears to have headed south along with its manager, although a late-session buying spree trimmed equities losses considerably on Wednesday, with the Nasdaq Composite index actually finishing in positive territory after being down as much as 36 points.

The S&P 500 ended Wednesday's session off 0.16%, while a 175-point intra-day Dow loss was cut to 27 points as the closing bell rang.

With not much news to report on our Boring investments today, I thought I'd offer a few comments on how the Boring Portfolio looks from below -- that is, from down here in Australia.

As you may recall, Borders Group (NYSE: BGP) intends to open a superstore in Melbourne later this year, following-up on the debut of their first international superstore, in Singapore, last year. I won't have the opportunity to visit Melbourne on this trip, but if life in the reputedly more casual city of Sydney is any indication, the Borders superstore concept is a natural for the land of Oz.

Folks here enjoy getting out and shopping, and they love to socialize at their cafes. Yet there's nothing like a Borders superstore that offers the range of products -- and in an inviting setting -- that the book-loving (and music-loving) Aussies want.

I hope very much to be able to report to you from the Melbourne store later this year. Or perhaps one of you might report to us! As you can see, there's no problem accessing the Web and America Online from Oz.

Well, actually there is one slight problem. The infrastructure cannot keep up with the accelerating demand.

I've been told that there are approximately 400 Internet service providers in Australia. All but a handful of them are little more than Mom and Pop operations, however. The two major communications companies here -- onetime government monopoly Telstra and its principal competitor Optus -- are gearing up to offer both dialup and broadband access to Australians now, and industry analysts say that interest in the new services is quite large.

All of which is to say that the opportunities for networking king and the Borefolio investment Cisco Systems (Nasdaq: CSCO) appear from here to be every bit as great as the folks back on Tasman Drive in San Jose tell us they are.

Also, did you know that Australia has one of the highest penetration rates for mobile phone usage in the world, second only to the Scandinavian region that is home of mobile telecoms leaders like Ericsson (NYSE: ERICY) and Nokia (NYSE: NOK.A)?

Approximately 30% of Australians use a mobile phone today, according to recent market studies. More importantly for companies that provide the infrastructure for wireless communications -- such as the Borefolio's Andrew Corp. (Nasdaq: ANDW) -- 90% of Australians express interest in having a mobile phone.

Ninety percent. Wouldn't you want to have a stake in an industry in which nine out of ten people say they want your product yet only three out of ten currently have it? Well, I would -- assuming, of course, that there was some realistic chance that the demand could be fulfilled at a price that interested consumers could afford.

Happily, that assumption is not unrealistic -- at least not for a whole lot more than the 30% of the Australian population who currently have a mobile phone.

Why such a gap then?

Well, the problem here -- as it is back in the States, as well -- is that the process of getting and using mobile service could not have been made more daunting and cumbersome to the ordinary consumer if it had been designed by a committee of Internal Revenue Service agents and Department of Motor Vehicles clerks.

Ten different rate plans. Peak rates. Off-peak. Weekend. Activation fees. Cancellation fees. Forty-nine handset choices. Analog or digital? PCS? Roaming capability? You want a phone you can send and receive your email on? You want a leather case with that? You want fries with that?

Happily, the telecoms folks are coming to see that they need to stop stepping all over themselves in selling stuff to customers. And they're working on increasing service coverage and capacity. So even if companies like Andrew Corp. are currently experiencing a lull in some of their business, there are signs that the lull could soon pass.

At least that's the view from Down Under.

Cheers, mate.

FoolWatch -- It's what's going on at the Fool today.

Stock  Change    Bid 
 ANDW  -  1/4   21.13 
 CGO   -  7/8   34.50 
 BGP   -1       31.00 
 CSL   -  5/16  47.94 
 CSCO  +1 7/8   77.81 
 FCH   +  9/16  34.63 
 PNR   +  7/16  42.94 
 TBY   -  1/16  9.94 
                   Day   Month    Year  History 
         BORING   -0.36%  -1.90%   1.22%  27.37% 
         S&P:     -0.16%  -1.76%  12.55%  75.71% 
         NASDAQ:  +0.17%  -4.67%  13.42%  71.10% 
     Rec'd   #  Security     In At       Now    Change 
   2/28/96  400 Borders Gr    11.26     31.00   175.40% 
   6/26/96  150 Cisco Syst    35.93     77.81   116.55% 
   8/13/96  200 Carlisle C    26.32     47.94    82.10% 
    3/5/97  150 Atlas Air     23.06     34.50    49.62% 
   5/20/98  400 TCBY Enter    10.05      9.94    -1.07% 
   4/14/98  100 Pentair       43.74     42.94    -1.84% 
   11/6/97  200 FelCor Sui    37.59     34.63    -7.89% 
   1/21/98  200 Andrew Cor    26.09     21.13   -19.03% 
     Rec'd   #  Security     In At     Value    Change 
   2/28/96  400 Borders Gr  4502.49  12400.00  $7897.51 
   6/26/96  150 Cisco Syst  5389.99  11671.88  $6281.89 
   8/13/96  200 Carlisle C  5264.99   9587.50  $4322.51 
    3/5/97  150 Atlas Air   3458.74   5175.00  $1716.26 
   5/20/98  400 TCBY Enter  4018.00   3975.00   -$43.00 
   4/14/98  100 Pentair     4374.25   4293.75   -$80.50 
   11/6/97  200 FelCor Sui  7518.00   6925.00  -$593.00 
   1/21/98  200 Andrew Cor  5218.00   4225.00  -$993.00 
                              CASH   $5429.76 
                             TOTAL  $63682.89