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The
conversation sounded straight from the dot-com boom a
decade ago, but it happened this year.
A giddy
Wall Street
analyst asked a technology executive on a conference
call about an "exciting" new product that
everybody "except for some folks on the moon"
just couldn't wait to hear about.
"I
wouldn't want to take away your joy of surprise,"
the executive responded coyly.
Two days
later,
Apple Inc.
unveiled its iPad tablet computer.
Hype is
alive and well in technology today, and whether it's an
Android phone, a cloud-computing application or the
heavily promoted linkup of
Microsoft
and
Yahoo
search engines, the hoopla seems to be everywhere.
A month
or two ago, many
Wall Street
pros were assuming that tech stocks had run their course
after a blistering 2009. Maybe not, some say today.
"I
definitely think there's more behind the hype
here," said
Douglas Nardi
, a managing director at Legg Mason Investment Counsel
in
Chicago
. "There seems to be more of a supercycle as a
result of the wireless innovation out there."
Supercycles
aside, many tech investors have come to believe that
hype can be a valuable indicator, rising and falling in
predictable waves.
A flurry
of innovation leads to soaring expectations — in other
words, hype — followed by a reality check. Eventually,
practical developments prove their worth in the
marketplace.
No matter
what, it takes time. Even if the ideas work as
advertised, the legal, regulatory and competitive
environments rarely allow for progress at the pace
investors would like.
The big
run-up in stock prices last year owed as much to the
relatively strong balance sheets and cash flow at tech
companies as to any lofty breakthroughs. This year,
bullish investors have a more ambitious outlook.
Corporations
in
the United States
and abroad that padded their rainy-day funds during the
economic crisis will be looking to invest in
productivity-friendly technology, said
Jack Ablin
, chief investment officer at
Chicago's
Harris Private Bank
.
"We've
got unprecedented levels of cash on corporate balance
sheets," he said. "Those companies will be
looking to spend if there's a way to do more with fewer
people."
Beyond
that, the boom in mobile wireless is still gathering
momentum. Infrastructure needs to be expanded to
accommodate a surge in data transmission. And every day,
it seems, brings additional amazing tricks that regular
people can perform with their smart phones.
As
Legg Mason's
Nardi put it, "The phone is becoming like a Swiss
Army knife."
At
Morningstar Inc.
research firm, equities strategist
Paul Larson
suspects that tech stocks have climbed about as high as
they can go for now — "fairly valued," he
calls them.
But he
still has faith in their fundamentals, and he's not
turned off by the hype.
"We're
nowhere near" the overheated excess that prevailed
during the dot-com fever of 2000, said Larson, editor of
the StockInvestor newsletter. "Today is 95
degrees," he said. "That was 'broil in the
oven.'"
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