Montgomery Tech Week: It's a Broadband Affair

SAN FRANCISCO -- Broadband, baby, broadband.

That's the mantra that two senior level RealNetworks (RNWK) executives offered up to a crowded session at the NationsBanc Montgomery Tech Week conference late yesterday. CFO Paul Bialek kicked things off with an interesting factoid: After the two Web browsers Explorer and Navigator, RealNetworks' RealPlayer is the third most downloaded product on the Internet, with 50 million unique registered users.

Phil Barrett, a senior VP, then argued that the emergence of high-bandwidth Internet connections wouldn't put the company out of business but would rather increase the need for streaming media because of scaling limitations. "I never thought I'd say a T3 is a garden hose but it's becoming that way," said Barrett.

Despite its pole position in the market and a fairly strong balance sheet, Real Networks faces one competitive challenge that could spell disaster for the company. It's their ex-investor, now competitor Microsoft (MSFT). (Remember when Netscape (NSCP) was kicking butt in the browser market?) Despite Microsoft's introduction of NetShow, Bialek said RealNetworks' market share remained constant at around 85%. But Microsoft has said future releases of its Windows operating system will include NetShow, not RealPlayer.

Money managers generally seemed impressed by the session, if somewhat concerned about RealNetwork's prospects in the future. "So long as developers continue to develop content in RealNetworks format that's a real barrier to entry," says Deron Kawamoto, an investment analyst with American Century, who has not bought the stock. "However, I expect industry-wide pressure to create open formats."

Kawamoto added, "If we think open standards are three to five years away, then it's a screaming buy. But if they're a year away, it's a problem."

-- Spencer E. Ante

Compuware Goes Shopping

Systems management software company Compuware (CPWR) said it's looking to acquire a software-services company in Europe and North America this year and hopes to announce a deal in the "not-too-distant future."

"We're looking at acquisitions in North America and Europe to boost our services," said Compuware president Joseph Nathan, noting that when the company offers clients services in addition to its software, it tends to win more deals. However, Nathan stressed to investors today at the annual NationsBank Montgomery Securities conference that the company would only make deals that would be accretive "from the start."

Compuware shares have struggled after its third-quarter earnings report generated concerns of sluggish revenues as companies shift spending priorities to the Y2K problem. There were also concerns about slower growth in Compuware's MIPS (millions of instructions per seconds), a measure of processing power. Compuware makes money when companies upgrade processing power.

As a result, investors have been looking for Compuware to make up the expected loss in revenue growth elsewhere, including potential acquisitions. Houston-based competitor BMC Software (BMCS) recently acquired BGS and is expected to close its purchase of Boole & Babbage (BOOL) in coming months to become the third largest provider of systems management software.

-- Medora Lee

Fishing in Montgomery's Pond

Just what NationsBanc Montgomery needs is rival investment bankers trying to drum up business at its Technology Week conference.

Well, that's what one conference attendee was doing. After sitting in on the eBay (EBAY) presentation today, an unnamed investment banker says he's here to see what key trends are emerging in technology, more specifically what trends are in the software and Internet spaces. "We are looking to find smaller companies who are emerging in these spaces and then hope to take them public," said the banker, with a couple of analysts in tow.

Like everyone else, he was especially interested in Amazon.com (AMZN), which presented Monday morning, and eBay. Both have "amazingly simplistic" business models. "They completely bypass the middle man," he says. "No inventory, no overhead: just matchmaking."

-- Suzanne Galante

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