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TheStreet Open House

Goldman Tech Conference: Meet Michael Dell, B2B Entrepreneur

PALM SPRINGS, Calif. -- The Goldman Sachs Technology Investment Symposium has just begun. Yet it's already abundantly clear that the old-tech guys are envious of the new paradigms set for Internet-related plays.

"Since every Internet company is expected to grow at the rate we have grown at over the last 10 years, I would like to congratulate them in advance for 10 years of 50%-plus growth," Dell (DELL) CEO Michael Dell, whose company's revenue has grown that much and more on average over the past decade, said during his keynote speech Monday.

The old-tech companies aren't really hurting all that much; they just don't feel they're getting their proper respect. But that will all change soon, Intel's (INTC) Paul Otellini promised in another presentation Monday: The launch of Microsoft's (MSFT) Windows 2000 will present PC and hardware companies with a lot of business this year.

Still, some money managers say it's a bit early to re-enter PC-centric old-tech stocks. For instance, Windows NT "took four or five years to become a phenomenon," said a large-cap analyst at a money-management firm, who requested anonymity. "I think a lot of buy-siders are saying Windows 2000 will have a less powerful impact over the next six to 12 months, but a more powerful impact over the next three to five years." The money manager doesn't own Microsoft or Intel stock.

Dell2B

In case you hadn't heard, Dell is now an Internet infrastructure company. Michael Dell said his company is now selling more Internet servers than Sun Microsystems (SUNW), which seemed to inspire at least one conference attendee to grab his cell phone and whisper, "Let's buy some Dell" into the receiver. Dell had a 25% share of the U.S. server market at the end of the third quarter of 1999, up from 17% at the end of 1998, according to Dell. His remarks regarding Sun were unusually pointed: "Sun is going to waffle on Linux and that is going to create an opportunity for us." Sun representatives weren't immediately available to comment.

Beyond hardware sales in servers, storage and PCs, Dell now plans to enter the Internet consulting, Web-hosting and application-service-provider markets. The Wall Street Journal reported Monday that Dell had set up an Internet Partners Division to drum up new revenue streams. "Our beyond-the-box revenue, from services to DellWare, Dell auctions and Gigabuys.com, was up 75% year-over-year in our third quarter to nearly $1.2 billion," said Dell, referring to the company's third quarter ended last October. Dell is scheduled to report Thursday fiscal fourth-quarter earnings for the period ended Jan. 28.

Convergence

America Online's (AOL) Ted Leonsis may have been the most eagerly anticipated executive to appear Monday, even with Otellini and Dell on the bill. Leonsis' presentation incorporated the Time Warner (TWX) acquisition and was about as wide-ranging as could be expected. With dozens of top-tier off-line and online brands from AOL and Time Warner, Leonsis focused on the company's global opportunity, using such brands as CNN and ICQ, its Internet messaging service with 56 million users, as ways to create the dominant global media brand.

One previously hidden global long-term opportunity is AOL's huge Asian presence. AOL owns 8% of China.com (CHINA), which was recently listed on the Nasdaq, and it has the option to buy up to 23% of the company. China.com, which already has a market cap of $3.5 billion, also owns the domain names to Hongkong.com and Taiwan.com.

But what about the companies AOL and Time Warner don't own? asked one attendee from the back of the SRO crowd. "We will turbo-charge on the properties we own with AOL and Time Warner, but we will keep our relationships with other companies," said Leonsis, AOL's president of its Interactive Properties Group.

Helping Hand

The most notable addition to the Goldman roster of companies was Palm, the 3Com (COMS) division that is expected to have a big IPO in the first half of the year. "We feel we are in a very good position to lead this offering," said one Goldman banker who spoke on the condition of anonymity. Palm is set to present at noon Tuesday.

New Buzzword Watch

Michael Dell used the term "IB2IB," referring to Internet Business to Internet Business, possibly supplanting B2B as the catch-all term of the moment. But just wait -- there's four more days of buzz-filled presentations left here in super-sunny Palm Springs.

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