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Our panelists give you the scoop on all the inside business information before you hear it anywhere else in The Informer segment:
David Asman: Chana, Iraqis need phones, and they’re starting from scratch. Who’s going to sell those phones and how do we make money off of it?
Chana Schoenberger, staff writer: Well, there are four big companies poised to make money out of this. It’s about a $200 million plan, and they are Motorola (MOT), Nokia (NOK), Ericsson (ERICY) and Siemens AG (SI). They’re all cell phone equipment makers and makers of the actual phones. What happened is that the Unites States gave concession to Iraq for three Middle Eastern countries. These are all companies that have existing vendor relationships with those Middle Eastern companies.
David Asman: Bruce, it’s a great idea.
Bruce Upbin, senior editor: Yeah, but how come only one of the companies is American? I thought that when we went into the war, it would be “to the victor go the spoils.”
Chana Schoenberger: You know, it’s funny because, actually, the standard that they went with here not CDMA, which is QUALCOMM (QCOM) standard, but actually GSM, which is the other one. So the Americans are ‘behind the eight ball’ on this one, entirely.
David Asman: So, there’s no infrastructure, they’re starting from scratch, they may have a phone service more modern than ours. We’ve got to move on. Bruce, Sun Microsystems (SUNW) used to be one of my favorite stocks. I sold it a while back.
Bruce Upbin: Yeah, so did a lot of people. This stock is around $3.70, or something. It’s the stock that everyone loves to hate, but I’m here to tell you that it’s going to go up. They’re doing all the right things, they’ve stabilized the management, they’ve cut costs enough. A lot of people on Wall Street who used to love this stock at $95, are now yelling at the company, that they’re doing all the wrong things.
David Asman: Wow, Chana, the stock could double? That’s big money.
Chana Schoenberger: I don’t think so. The problem with Sun is that it doesn’t have as big a services division, and services are really going to be the future of technology. IBM (IBM) has a huge services division, on the other hand.
Bruce Upbin: Yeah, but they’re spending so much money on the core technology, which is what we need to do right now, to go forward.
David Asman: OK, SUNW, the contrarian move. Now, Mike, you have the cover story.
Mike Ozanian, senior editor: The 200 best up-and-comers. There’s a company that I like a lot on there called ResMed (RMD).
David Asman: So, these are small companies, with huge potential?
Mike Ozanian: Right. Sales right now, under $600 million, but fast-growing earnings, so they’re going to get big, quickly. ResMed is a company that makes products for people who have trouble breathing when they sleep, like masks to help them breathe. The stock’s around $45. It’s going to $60.
David Asman: Anybody like this, or other small companies?
Bruce Upbin: I like the stock that I wrote about for the cover, Mercury Interactive (MERQ).
David Asman: That’s the guy, the guy who is on the cover of the magazine, is the guy you wrote about?
Bruce Upbin: They do software, and have very smart management.
Makers & Breakers
Clear Channel (CCU)
Richard Steinberg, portfolio manager of the Reserve Large-Cap Growth Fund: MAKER
We like to be G.A.R.P. investors, or “growth at a reasonable price,” and Clear Channel is the largest player in radio, also in the billboard business. Everybody’s sold these things down because advertising hasn’t turned and if the economy actually does start to turn, this is where we’re going to be able to make money.
Jim Michaels, editorial vice president: BREAKER
Good company in a good industry. It’s selling at thirty times next year’s earnings, fifteen times cash flow. It’s a good company, but I’m not buying it at this price.
Pete Newcomb, senior editor: MAKER
I was, kind of, borderline on this stock, but then I realized that it’s a media company. I have to love it. This is more than just a radio company and a billboard company. I really like their concert promotion business, it’s expected to grow by double digits next year. I like it.
Richard Steinberg: I think you’re wrong on the price. I think that the cash flow, the ability of companies that own market share when business gets better, they have the ability to drive margins. And I think you’re going to see this thing trading in the low-fifties and the cash flow’s going to get much better.
Hewlett-Packard (HPQ)
Richard Steinberg: MAKER
Everybody has no confidence in Carly Fiorina (Chairman and CEO), maybe she gets fired, and more importantly, this is the Gilette razor blade model. I think that everyone loves to hate this name, but if people start buying more computers, and businesses buy more computers, they need the printers, they give away the printers, to get people to buy the consumables.
Jim Michaels: BREAKER
I don’t share this touching faith in “magazine cover celebrity CEOs.” Besides which, Carly Fiorina is now in politics. I don’t buy the argument that she is going to turn this company around. Secondly, it’s going to be a lot of problems. It’s basically a commodity producer of PCs, it’s copier business produces all the profits, there are people beginning to cut away at other companies’ prices. I want to see some of those new products that their talking about.
Pete Newcomb: MAKER
I’m a maker. I kind of agree with Rich. This stock has been unfairly beaten down. They have all sorts of great new gadgets coming out. I like it.
Richard Steinberg: DVD writer, a new product that’s coming out. You’re going to be able to watch TV, and take a video tape and make a DVD right off of it. It’s an incredibly expensive business right now.
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