BARRON'S COVER: Technology Outlook By Bill Alpert
Highlighted companies: Dell (DELL), ASML (ASML), Cymer (CYMI), KLA-Tencor (KLAC), McAfee (MFE), Symantec (SYMC), Synopsys (SNPS), Avici Systems (AVCI), Crown Castle Intl. (CCI), NetEase.com (NTES), New York Times (NYT), The Knot (KNOT), WebMD (WBMD)
Summary: The tech sector has outperformed over the past few months, as earnings guidance had been massively cut with an eye on a slower economy but tech spending (both corporate and consumer) has actually continued apace. The sector's valuation remains around its historical average, and there are no signs of a slowdown in corporate IT buying. Data storage and application software look particularly strong. Barron's annual tech outlook includes opinion from analysts at Paul Wick's Seligman Communications and Information Fund, which is up 16% this year. Bullish calls: Wick thinks McAfee may be a buyout target in the wake of its options difficulties. He's also long cap equipment producers KLA-Tencor, ASML and Cymer, and a software supplier to that industry - Synopsis. Seligman analysts are bearish on semi majors such as AMD and the fund is short Avici Systems, an 'also-ran' in the telecom router business that they claim have simply run out of orders. Other Seligman short ideas: NetEase (slowdown in online gaming), WebMD (overvalued), The Knot (overvalued), the New York Times (too much exposure to newspaper advertising) and cellular antenna-tower provider Crown Castle International (overleveraged).
Quick comment: Smallcap AVCI may well move on Monday morning in response to this article. WebMD is trading at 340 times earnings. Read The New York Times Company's recent conference call for insight on its print vs. online businesses.