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Investment View

It did seem like a good idea at the time. It was February, after all. The

Nasdaq was still soaring and technology shares were fast becoming the

biggest single industrial sector in the FTSE 350. So we decided to go for

it. The Greig Middleton London Technology Conference was duly org-anised

for the end of May.

Flying in from Paris on the morning of the conference (jet-setting is

something of an optional extra in retail stockbroking), I was having severe

doubts as to whether the title of my contribution, Is Technology The Only

Game in Town, had quite the right ring to it three months on.

Channel-hopping in my hotel bedroom during the previous three days had both

kept me abreast of the continuing gyrations in the technology market. was bust, TMT IPOs were being cancelled daily and Egg looked like

coming to the market at a much lower valuation, if at all. (As it turned

out, the lower-valuation approach won the day but then Egg is more than a

dotcom idea).

Technology is not strictly home turf to me. We still only use the video

recorder at home when one of my sons comes to stay. Fortunately, a

cornucopia of talent was available on the platform, so listening to Bijan

Khezri of Baltimore Technology, Michael Bourne, manager of the Finsbury

technology trust, and Christopher Sharples, technology entrepreneur

extraordinary, gave me and the audience considerable food for thought. Yes,

the market had become overblown in the early weeks of the year. No,

technology was not the only game in town but most definitely it was here to


An interesting case study exists on the other side of the Atlantic where teeters on the brink of insolvency, having once been worth well

over $1bn. A business-to-consumer health site, DrKoop was an IPO last

summer, raising $84m for investors and making serious money for the

advising bankers and underwriters. Its burn rate is such that all the money

it raised will have been spent before the company has been in the public

domain for much more than a year.

Even so, you ignore technology at your peril although it is important to

take care over what to back. Investors are now beginning to recognise that

new ideas in the business-to-consumer field may never achieve their

original enthusiastic and optimistic expectations because, quite frankly,

either the market is not there or traditional companies will adapt to head

off the challenge. Business to business is clearly making more of a running

through the easy-to-identify benefits that can accrue in cost saving. But

in pure technology plays, it is the providers of IT solutions that look

likely to maintain their edge and grow faster than conventional companies.

However, even these are not immune from the wild swings in sentiment

presently taking place. It is ironic that one such company, Baltimore

Technology, a leading player in the encryption techniques that are so

crucial to the development of e-commerce, is likely to be replaced in the

FTSE 100 index by another unique high-tech company – Bookham, a niche

player in fibre-optic technology backed by Intel.

One message came over loud and clear from the conference. The focus may be

on technology shares at present but it is in the way that all companies and

industries apply the new technologies that should be exercising the minds

of investors. Companies unwilling or unable to change and adopt new

processes could well find their business eroded rapidly. This will make

stock selection an even tougher process for the future and also seems

likely to accentuate the volatility with which we are all having to live.

But if that is the way of the world, we shall just have to work harder at

delivering the results our clients expect.


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