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Show Page E4 THE DAILY HERALD, Provo, Utah, Sunday, January 21, 1996 The great com Why are tc ch stocks taking a drubbing? Why did they go up? By ROBIN STACY Newspapers Though I can't claim to follow the stock market in any meaningful fashion if they kept records for financial savvy, I'd surely be among it's those in the lowest percentiles been nearly impossible to ignore the drubbing that computer-relate- d stocks have taken in the last few weeks. From Cyrix to Intel to Microsoft, many of the biggest names in the computing world have seen their stock prices tumble by about a fifth to more than half of the high prices they've reached in the last year. Of course, it seems to me that simply discussing why the prices dropped begs the larger question of how many of these prices rose so meteorically in the first place. While I can claim no special insight into the truth behind either of those questions, I do understand a few of the ' trends involved. First, I guess, is just the general economic picture that's driven Wall Street over the last few years as interest rates have dropped thanks to an improving economy, investment capital has moved out of bank- - and bond-typ- e savings to stocks. Adding to that has been corporate America's switch away from traditional retirement plans- to 401(k) plans, where employee retirement savings are pooled to fund investments, most of which have been in stocks. , ; j So, hVgeneral, as' Wall Street has share of had an America's investment capital, it's inevitable that stock prices in general would rise. Though IBM has been a "blue-chip- " stock almost all my life, for the most part, computers in general are among the least mature industries in America, giving them the greatest potential, one imagines, to experience dramatic growth. It's nearly impossible to consider the question of the stock market in general-- without remembering the parable of the tulip boom, and consequent bust. Back in, I believe, the 17th centuthere was a stock market at before ry, all, there developed a brisk European trade in tulip bulbs. Tulips are nice enough flowers, I guess, and as wealth grew, people used some of their money to buy tulips to plant around their houses and estates. This prompted others to want tulips themselves, so, by inevitable economic law, as increasing capital chased a scarce resource, the price of the bulbs went up. Once the price of tulip bulbs started rising, those with a lot of money saw an opportunity to make a lot more. They bought up tulip bulbs. t "Those late to the game, of course, "ere stuck in the position of paying more for their tulip bulbs, creating profits for the early investors. These investor profits, in turn, attracted more investors. ; There being more people with money than there were tulip bulbs available, tulip prices soon reached astronomical heights, with certain rare tulip varieties fetching the equivalent of thousands of dollars per bulb. ' . As you might imagine, this creat ed a number of tulip bulb millionaires." Which, in turn, attracted still more investors. Knight-Ridd- - ' i ever-increasi- . Soon, a good percentage of Europe's capital was tied up in tulip bulbs. Tulip bulbs became worth their weight in gold, and then some. Then, of course, reality came crashing. "Wait a minute," people said. "Tulips are nice enough flowers, but they are, after all, just flowers. What in the world am I doing trading my valuable gold for flowers?" So, even quicker than the market had expanded, it collapsed. Overnight, tulip investors by the thousands' were left paupers. While companies, of course, aren't just flowers, it's important to remember that stock is just paper. IBM is a huge company, which owns probably thousands of patents, hundreds of product lines each with a viable market and scores of research labs crafting meaningful new technologies. Its stock, however, is just paper. At various times in the past, each of those pieces of paper commanded well more than $100 on the market. But as Microsoft's profitability ascended, IBM's fell, and Big Blue lost its luster. Though dividing IBM's assets by the number of its shares revealed that each share of IBM stock should be worth at least $80 or so, share prices at one time dropped to about $35 or so. As IBM has returned to profitability, its stock price has again increased. People who bought IBM at $35, of course, have made a killing, more than doubling their investments. Yet IBM is not considered a growth stock, as people remember when its price was higher still. Most of the computer industry, obviously, jsn't IBM. In a lot of ways. While most computer-relate- d companies don't have IBM's maturity, and so have greater potential to more dramatically increase their profitability and value, they also lack IBM's assets. To me, that means they have greater downside potential as well. Consider Microsoft. Remember the frenzy over Windows 95? Because over the years almost every PC sold was shipped with DOS and Windows installed on it, it was imagined that all 100 million or so PC owners would be more or less inevitably upgrade to Windows 95. That could still happen, of course, but it certainly hasn't yet. Though . Windows 95 has been out for about half a year now, it's estimated that somewhere between 7 million and 10 million copies of Windows 95 have been sold. ' So, the installed Windows 95 user base is about the same size as the installed OS2 user base. Yet OS2 is considered a failure, while Windows 95 is considered a smashing success. Regardless the real relative success of Windows 95, Microsoft is a profitable company. Netscape, of course, has written the browser with which most people explore the World Wide Web, as well as the server that operates many Web sites. As anyone who even vaguely follows the computer industry knows, the Web has run through corporate America in the last year like prunes. Any company that doesn't have a Web site probably has one in the works. That made Netscape the darling of the stock market. Yet if Netscape has had a profitable year, it's news to me. Still, its stock, issued at about $30, peaked at just under $175. Clearly, people who bought at $175 are out a substantial sum of money. But is a Netscape share worth $175? Or $130? Or even $30? Netscape's principal product, Navigator, is free. ' While its Commerce Server and ' related software certainly aren't free, !( is Netscape the Microsoft of the '90s? Is the Web itself a trend or a fad? Will anybody, Netscape included, make money off of it? There's a general lack of excitement .these days in the world of personal computers. Though machines and components are getting ever faster and cheaper, as they have for years, there's no development on the horizon of which I'm aware that portends any dramatic new revolution. I dare say that the industry as a whole is, in fact, duller than it has been at any time in the years I've been writing this column. Has Wall Street, too, come to this realization? Is the recent sell-o- ff a simple correction, or are computer stocks doomed to fall still further? Obviously, if I knew the answers to those questions, I'd be out investing instead of sitting here writing. TO CQLUUCt Okay, maybe it seems a little early to be thinking about your kid's col- lege. After all, you've still got 1 2 years before the books, the living expenses, the . sky- rocketing tuition... or was that 8 years? 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