Chat: Reporter Joe Bousquin Talks E-Commerce

Joe Bousquin chatted on AOL MarketTalk Monday, Feb. 5 at 5 p.m. EST.

AOL Host: Live from California, please welcome Joe Bousquin, reporter, TheStreet.com. Joe can answer questions about the market and enterprise software. Visit Keyword: TheStreet.

TSC_Bousquin: Hello, thanks for having me.

Question: With only a few major earnings reports due and no Fed meeting until March 20, what will the markets be looking at in the near future?

TSC_Bousquin: Specifically, for technology stocks, one of those few earnings reports left is a big one, Cisco Systems (CSCO Quote - Cramer on CSCO - Stock Picks). Given CEO John Chambers mixed comments about his company's performance lately, those results will likely weigh on the market. And they report tomorrow.

Question: Can we get your general thoughts on the e-commerce software sector?

TSC_Bousquin: Yes. I think e-Commerce software is a major change component of business today. This software shifts the focus from making the individual more productive, to making an entire company so. It is still one of the top priorities of most corporations doing business today. But this is no secret. And the stocks of these companies, like PeopleSoft (PSFT Quote - Cramer on PSFT - Stock Picks), Siebel (SEBL Quote - Cramer on SEBL - Stock Picks), and Oracle (ORCL Quote - Cramer on ORCL - Stock Picks), are expensive because of that.

Question: What smaller or lesser known or followed names do you expect to be long-term winners in Internet-related software?

TSC_Bousquin: Wow, that's always a good question! But of course big companies are big for a reason, and small companies haven't had a chance to get that big yet. So prognosticating upon that future is always a risky game. That said, some fast, smart and up and coming companies that I've come across are Idapta, RightWorks, and Peregrine Systems (PRGN Quote - Cramer on PRGN - Stock Picks).

Question: With recent weakness in Oracle, is the database giant starting to be knocked off its throne by its competitors?

TSC_Bousquin: I wouldn't bet against Larry Ellison today, anymore than you would have bet against Bill Gates and Microsoft (MSFT Quote - Cramer on MSFT - Stock Picks) in 1985. Oracle is an incredibly smart and aggressive company that is at the forefront of the new distributed model of computing. If you're interested in this space, I think that's a company that you have to consider as a core holding.

Question: Do you believe sell-side analysts will continue to support the long-term potential of Ariba (ARBA Quote - Cramer on ARBA - Stock Picks), and any thoughts on their merger with Agile Software (AGIL Quote - Cramer on AGIL - Stock Picks)?

TSC_Bousquin: Sell-side and Ariba is an interesting story. Six months ago you could hardly find an analyst who didn't think that this company was the very essence of the next, next big thing. However, since the company's fourth-quarter conference call, there has been a nagging sense of doubt among analysts in the forthrightness of the company's management.

TSC_Bousquin: I was very surprised at a recent Oracle event when the conversation turned for a few minutes not to Oracle's products, but instead to Ariba's credibility. That credibility in part is being undermined by a recent and somewhat surprising changing to the way Ariba recognizes its revenue. Without getting into the specifics, analysts are worried that if Ariba wanted to hide slowing growth, this accounting change would be a good way to do it.

TSC_Bousquin: On the Agile acquisition, this was a deal that got a lot of attention in the marketplace, and rightfully so. However, it was also a deal that Ariba had to do. In the last few months, Wall Street has been clamoring for Ariba to expand what analysts call its "application footprint". Basically, what that means is the software that Ariba builds that helps companies buy office products and the like over the Internet, is no longer a compelling enough offering to base an entire business upon. They need to get software that runs the back-end processes of companies such as design and collaboration. The Agile acquisition, while very expensive at $2.4 billion will help them do that.

Question: In addition to Oracle, what other companies do you consider core holdings in the space?

TSC_Bousquin: I would say PeopleSoft, SAP, and Seibel are certainly companies that have proved again and again that they can execute and come back from any stumbles they may encounter.

Question: Why has Broadvision's (BVSN Quote - Cramer on BVSN - Stock Picks) stock been in the tank over the last few weeks?

TSC_Bousquin: Oh my goodness! Broadvision. Thinking about their conference call makes me want to cry. Here is a company that beat revenue expectations while missing its earnings number by three cents. It became clear on that call, that this was simply a case of classic mismanagement.

TSC_Bousquin: Broadvision is an incredibly fast growing company and they've had to hire a lot of people to keep up with that growth. However, they had tremendous problems in managing the spending it took to grow the company. This resulted, management said, in inefficiencies and duplications when it came to new employees up to speed. From the numbers that were presented on the call, investors can only conclude that somebody fell asleep at the spending switch. It will take a long time for Broadvision to regain its credibility on Wall Street.

Question: Do you see good futures for both Veritas (VRTS Quote - Cramer on VRTS - Stock Picks) and Siebel Systems?

TSC_Bousquin: One interesting thing about Siebel and the so-called CRM market (which stands for Customer Relationship Management), is that this is one of the few specialized areas of software today where people are not saying that companies need to expand again their application footprint.

TSC_Bousquin: Customer relationship management has been really hot in the last two years. As companies strive during these potentially tough economic times to become more efficient. A focus on understanding what your customer truly wants and finding out how to get that to them, becomes more important. Again, I would point out, Siebel is an awfully expensive stock. But as a business, they are in a very sweet spot. On Veritas, this is a company that helps companies manage and locate data. For the same reasons that CRM is important for making a company more efficient, what Veritas does is perhaps even more so. Again, the caveat--great company, expensive stock.

Question: What can you tell me about Computer Associates (CA Quote - Cramer on CA - Stock Picks)? Do you see demand continuing to rise for their mainframe products?

TSC_Bousquin: Good question. That's an interesting point. The growth in mainframe products surprised a lot of people on Wall Street. This was a market that was written off for dead, with the advent of the PC. What we're seeing now is that that obviously didn't happen. But I still don't think mainframe technology is the wave of the future. Computer Associates has over 800 product offerings. If they can get those offerings into the e-business space and be recognized as leaders there, then they will do well.

TSC_Bousquin: Keep in mind this is the third largest software company in the world. That said, from an investing standpoint, I haven't met anybody and I know I can't do it effectively myself, that can explain what that company does. And that's something that CA needs to deal with on an investor relations level.

Question: Are BEA Systems (BEAS Quote - Cramer on BEAS - Stock Picks)and Inktomi (INKT Quote - Cramer on INKT - Stock Picks) two quality names to own in this group?

TSC_Bousquin: I think so. Again, I would note the price of BEA Systems as being an expensive holding. Inktomi has felt pressure lately and is trading well below its 52 week high of $241.50 As a matter of fact, they closed today at $13.88. That trading range would lead even the most novice investor to question whether Inktomi's slogan that it is in fact essential to the Internet, still holds true. One of the things that's hurt this company has been the slowdown or I would say shift, in information technology spending.

TSC_Bousquin: Companies right now want to be able to point to a tangible return on investment. When you're using a software program like the ones that i2 Technologies (IWO Quote - Cramer on IWO - Stock Picks) builds, you're squeezing inefficient dollars out of your supply chain that you can take to the bank. Inktomi, on the other hand, helps your website run smoother. It helps you keep your caching information in a more organized manner. While this is clearly important, when you're running a business on the Internet, it's hard to see the same concrete dollars that you get back from it. I think they have good technology and that there will be demand for their technology in the future. Right now I think, as their stock price reflects, that demand has waned somewhat.

AOL Host: Thank you for joining us today Joe! We have been speaking with Joe Bousquin, reporter for TheStreet.com.

TSC_Bousquin: Thank you for having me, nice to be here and to all of AOL's users, good luck with your investments.