Roger McNamee Says the Consumer Tech Will Remain King in 2003
|Click on the company name to jump to McNamee's comments on the stock.|
McNamee is the cofounder of private-equity firm Integral Capital Partners and buyout firm Silver Lake Partners, two Silicon Valley outfits that invest in tech of all sizes, from venture-stage saplings to megacaps. The hoi polloi need not call their brokers; McNamee's funds are not available to the masses. (His Flying Other Brothers band is more egalitarian: You can receive free concert tapes via the Taper's Section of the band's Web site.)
However, we were eager to interview McNamee for this week's 10 Questions because TSC readers can learn a great deal from a man with a superlative long-term record in tech investing. As he says, "I've been doing it for 21 years and have lived to tell the tale." While his firms don't publicly disclose annual returns, McNamee called 2002 a surprisingly good year, thanks in part to the 2000 LBO-then-2002 IPO of Seagate Technology. McNamee wasn't allowed to discuss Seagate because of the mandated "quiet period" around stock offerings, but he freely discussed what worked in technology in 2002 and what he thinks will work in 2003 and beyond. In fact, since our conversation was as lengthy, far-reaching and involved as a Grateful Dead musical interlude, we have decided to run it in two segments over the next two days.
McNamee strikes several key themes about tech investing. First, he says consumer technology (i.e. -- video-game makers such as Take Two, online brokerages such as Ameritrade), after a great 2002, remains where it's at in 2003. Meanwhile, enterprise technology -- companies that serve corporate America and garner more attention from Wall Street -- look poised for another bad year, on average. However, McNamee thinks a few incumbent giants will do well -- explaining why he changed his tune on Cisco. He also discusses, among other things, what the future holds in wireless, why top-holding Overture Services isn't threatened by Google, how the Internet will evolve, why businesses are still leery about IT spending and why the 1990s will never happen again. So tune in, turn on and make money.
1. Where is the technology industry today, how did it get here and where is it going?The most important thing is to understand the context of the technology world in 2003. We've come off three years of brutal contractions that were necessary after the excesses of the 1990s. The industry really needed some kind of rationalization and consolidation because so many of the principles on which the industry was built in the late 1990s turned out to be misguided. There were three layers of demand superimposed on each other. In the mid-1990s, it started off with the client-server applications wave. Toward the end of the decade, you layered on the whole Y2K infrastructure upgrade. Lastly, you layered onto that Internet B2B thing.
Co-founder of Integral Capital Partners and Silver Lake Partners
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV