European Finance Topics
Giants in Difficulty
Be that as it may, Sega lost more than three quarters as doubts
arose about its ability to cut it in the hurly-burly world of
games consoles. Mitsubishi Electric (which owns the Panasonic
label) stayed on the floor as its exports disappointed, and
even the mighty Sony lost half of its shareholder value in the
second half of 2000.
Back in the States, Amazon has really had a very unpleasant time.
The online bookseller’s autumn profits warning was one of
the strongest reasons for the entire tech sector’s September/October
slump, and it might also be the reason why rival Bertelsmann is
now planning to dispose of its own on-line subsidiary Books On Line
(bol.com).
European Finance Topics & Amazon's Affiliate Programme
Although Amazon’s “affiliate” programme is
recognised as a market leader, the sheer weight of advertising and
distribution in its early years have dampened expectations that the
cut-price box-shifters may yet lose out to the traditional bricks-and-mortar
stores - not to mention the “clicks-and-mortar” direct
sites that their competitors are now forming in many countries. Hewlett-Packard
really ought to have known better than to get caught up in the general
melee. Its range of printers and computer peripherals are so dominant
in the personal computer marketplace that it should have been able
to avoid getting embroiled in the loss-making computer manufacturing
sector; instead, we’ve been forced to watch HP “reinventing
itself” and “going back to its roots”.
European Finance Topics - Apple
Apple got the worst of both worlds in 2000. First it took a spring
hit from US$75 down to US$45, then it recovered to US$65 before plummeting
to just US$29 in the space of a month. Early reports about management
disputes coincided with a fairly mixed press reception for Apple’s
new Cube computer - a machine with all the speed of a year-old PC
and all the expandability of a stunningly-designed shoebox. Meanwhile
Compaq, (once the world’s second-largest PC manufacturer) and
Dell (currently Number Two) were both issuing profit warnings after
disappointing sales. For a while it looked as though Intel,
the world’s largest chip manufacturer, might have the whole
situation under control. While all around it were losing their heads
in the crazy spring of 2000, Intel sailed ahead with a bullish performance
that lasted all the way to August. Then, in the space of a month,
it plummeted by almost 50 per cent as the profit warnings started
to come in and the reports of global overcapacity got worse. AMD,
Intel’s biggest rival, joined the fray as winter set in.
European Finance Topics - Alas For Baan
Alas for Baan, the Dutch-based provider of database software. Having
hit the US market at US$14-15 in November 1999, the company staged
one of the most spectacularly disastrous performances ever seen on
Wall Street. By mid-January its share price had plummeted to US$7,
and by May it was down to 10 cents before it grumbled along at US$2.50
for the remainder of the year. Baan’s problem was not just that
it was chronically overvalued: it was also that the company was a
one-trick pony which had relatively few possible responses when other
companies began to poach its territory. At least Logica, the
UK software consultancy, has a better story to report. Having soared
from 700p in October 1999 to an incredible 2900p in March 2000,
it suffered the usual disgrace of being forced down by 50 per cent
in the spring rout. But by the autumn it had settled into a plateau
at 2000 or thereabouts and was being tipped as a buy. The important
thing about Logica is that it’s relatively diversified company,
with interests that range from systems integration to corporate
outsourcing.
European Finance Topics - Diversified Technology Companies
And maybe that’s where the future lies. Contrary to all the
wisdom of the last decade, it may well be that diversified technology
companies will prove to be a stronger bet than the specialists. Look,
for example, at Japan’s diversified Hitachi, which is just about
the only tech company to be still keeping its stock price half-reasonably
stable in Tokyo. Think about Siemens, perhaps the most multi-faceted
- even, dare we say it, Philips? With the tailwind of a weaker dollar
and a stronger euro behind them, there are plenty of reasons to think
that these companies could do much better in 2001.
European Finance Topics & The Old Principle
Are we completely mad? Whatever happened to the old principle of defining
your research strengths as tightly as possible and then channelling
them into highly-defined fields of endeavour? Multimedia, that’s
what. If the recent mergers between Time Warner and AOL is anything
to go by, the tide is turning in favour of multi-entertainment and
information businesses that can send television through the internet,
the internet through the television, newspapers through a computer
screen and everything through a mobile phone. The whole information
industry is moving steadily into the arms of the new third-generation
round of wireless and multimedia technology - the one that’s
been dominating all the government airwaves auctions this year.
But it will cost absolutely colossal amounts of money to put these
market-leading operations together. Not, in short, the province
of venture fund managers, but of established companies with the
enormous financial clout that the new technology will demand.
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