Tech Stocks Dive
Monday, June 1, 1998
by Jerry Thomas
SHERMAN OAKS, CA (June 1, 1998) -- Intel sneezes and the tech sector catches pneumonia. Last Friday Intel Corp. (Nasdaq: INTC) warned that it would be delaying the introduction of its 64-bit Merced chip by at least six months, pushing its release into the middle of the year 2000. As commonplace as such delays are in the world of high tech, this was enough to cause the Nasdaq to swoon almost 2% on fears that tomorrow won't get here quite as soon as expected. Looks like Buck Rogers, Flash Gordon, and George Jetson are just going to have to wait.
Internet and networking stocks were especially hard hit in the fracas. Yahoo (Nasdaq: YHOO) surrendered almost 5% of its market cap while Excite (Nasdaq: XCIT) lost even more. And the network-heavy Fool Portfolio followed suit: America Online (NYSE: AOL), Amazon.com (Nasdaq: AMZN), and 3Com (Nasdaq: COMS) were all hit for big losses. Innovex (Nasdaq: INVX) and KLA-Tencor (Nasdaq: KLAC) didn't fare any better, but the real bow-wow of the day was beleaguered Iomega (NYSE: IOM), which got socked for a loss of almost 10%. In fact, thanks to today's declines, the intrepid Fool Portfolio is now losing to both the Nasdaq and the S&P 500 year-to-date.
Dadgummit, some days it just don't pay to get up.
Iomega took it especially hard today thanks to a sharp press release from its French rival, Nomai, which claimed a major court victory in the ongoing copyright and patent disputes between the two companies. The Nomai statement makes it appear as if a preliminary ruling by the U.S. District Court means that a total court victory for Nomai is a fait accompli. I'm sure that Iomega's lawyers will beg to differ, but so far there has been no official response from Roy, Utah, on these matters. Iomega also announced today some long-awaited price cuts on its Jaz2 product line, and the stock fell $5/8.
It is customary, on nasty days like this, for Fools to take a step back and look at the long view. One trading session means nothing in the grand scheme of things, and while we all must live in the day-to-day, the important trends do not become apparent unless one moves one's nose away from the ticker. Me, I find myself looking back some 10 months ago, waxing nostalgic over the quaint and romantic days of the summer of '97.
Regular readers of this column might recall a Recap I wrote last August 6th on a day when it was 105 degrees in Sherman Oaks, California, where I live. My air conditioner wasn't working, I was roasting, and there was little I could do but vent, if not my apartment, then my frustration. That air conditioner was only one of a series of troubles in my building, and my landlord at the time was little help. Complaints went unanswered, problems mounted, and if it weren't for the roaches, I would have had nobody to listen to me whine. It wasn't long before I was searching for a new place to live. By the time I was hauling my furniture to the new apartment, more than a third of the tenants in the old building had come to similar conclusions and the building stood almost half-empty. I was outta there by Christmas. I haven't seen the old landlord since the day he decided to keep my security deposit. That, somehow, seems like a fair trade-off to me.
Well, the story ain't over. I recently discovered that the air conditioner in my new apartment doesn't work either... and summer's coming. Gulp. Believe me, Fools, you do not want to spend an entire summer in The Valley without air conditioning. So a few days ago I mentioned the problem to the new building's manager.
This morning she came upstairs to examine the troubled machine. She took one look at it and, being French Canadian, muttered some Gallic phrase that I took to be an expression of disgust. Without even turning it on, she turned to me and said, "That's one of the old ones. We'll get you a new one. You'll probably have it tomorrow."
Now, maybe it's just a disease you get from working for The Fool, but this immediately struck me as a lesson in long-term investing. My old landlord, obsessed with the short-term costs like replacing an antiquated air conditioner, lost not only this tenant, but almost half of his others. The return on his investment was undoubtedly suffering because of this approach to management. On the other hand, the new apartment is looking more and more like a place I will want to stay for a very long time, happily signing those monthly rental checks and handing them to people who are actually providing service in return. There's a "No Vacancy" sign in front of this building. So, which property owner is likely to see a higher return on his investment over the long term? And how important is taking a long-term view in developing a program for accumulating assets? Given this analogy, how upset should a long-term investor in the stock market be on a day like today?
What do you do, Fool? I'll tell you what you do: you fix the air conditioner before summer comes, and enjoy today while it's here.
Wow, homey philosophy in the FoolPort Recap. Cool.
Finally tonight, I wanted to take note of an item that appeared in last Thursday's edition of the Wall Street Journal. Now, we in cyberspace like to make fun of the old-line Dead Tree Press, what with its inky smudges and its quaintly tangible hand-held newsprint interface -- like, how corny can you get? But let's be nice for a change. The article, titled "Some Web Sites Get Tough On Stock Chat," appeared on page one of the Money and Investing section, and focused on the efforts of Internet financial sites to control the hyping of penny stocks in their online forums. Our own David Forrest (TMF Bogey) is quoted prominently in the piece. The Journal is to be commended for the attention it is giving this very important issue, and also because their coverage was sound and fair.
Unfortunately, the net-savvy reader will slowly come to the dismaying realization while studying this piece that the venerated Wall Street Journal, the financial newspaper of record in the bastions of the Wise for well over a century, is still having trouble grasping the difference between a message board and a chat room. Imagine.
Come on guys -- if you're gonna walk the beat, you gotta learn the lingo.
Until next time,
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Day Month Year History FOOL -3.52% -3.52% 11.15% 273.03% S&P: +0.01% 0.01% 12.42% 138.00% NASDAQ: -1.80% -1.80% 11.24% 142.55% Rec'd # Security In At Now Change 8/5/94 710 AmOnline 3.64 78.75 2065.58% 5/17/95 1960 Iomega Cor 1.28 5.75 349.08% 10/1/96 84 LucentTech 23.81 68.94 189.55% 9/9/97 290 Amazon.com 38.22 85.63 124.02% 8/12/96 130 AT&T 39.58 59.06 49.23% 2/20/98 215 DuPont 59.83 75.50 26.18% 1/8/98 115 S&P Depos. 95.91 109.53 14.21% 2/20/98 200 Exxon 64.09 70.63 10.20% 4/30/97 -1170*Trump* 8.47 8.56 -1.11% 2/20/98 270 Int'l Pape 47.69 46.94 -1.58% 1/8/98 425 3Dfx 25.67 19.00 -25.98% 8/24/95 130 KLA-Tencor 44.71 31.25 -30.11% 6/26/97 325 Innovex 27.71 17.63 -36.39% 8/13/96 250 3Com Corp. 46.86 24.00 -48.79% Rec'd # Security In At Value Change 8/5/94 710 AmOnline 2581.87 55912.50 $53330.63 9/9/97 290 Amazon.com 11084.24 24831.25 $13747.01 5/17/95 1960 Iomega Cor 2509.60 11270.00 $8760.40 10/1/96 84 LucentTech 1999.88 5790.75 $3790.87 2/20/98 215 DuPont 12864.25 16232.50 $3368.25 8/12/96 130 AT&T 5145.11 7678.13 $2533.02 1/8/98 115 S&P Depos. 11029.25 12596.09 $1566.84 2/20/98 200 Exxon 12818.00 14125.00 $1307.00 4/30/97 -1170*Trump* -9908.50 -10018.13 -$109.63 2/20/98 270 Int'l Pape 12876.75 12673.13 -$203.63 8/24/95 130 KLA-Tencor 5812.49 4062.50 -$1749.99 1/8/98 425 3Dfx 10908.63 8075.00 -$2833.63 6/26/97 325 Innovex 9005.62 5728.13 -$3277.50 8/13/96 250 3Com Corp. 11715.99 6000.00 -$5715.99 CASH $11558.06 TOTAL $186514.90