The transcript is unedited and phonetic spellings are indicated with a (ph). Wall Street Review recently interviewed Adam Lashinsky. Wall Street Review can be heard Monday though Friday on KSDO.com and on KSDO AM 1130 in San Diego from 6 to 7 p.m. EST. Adam Lashinsky, who writes Silicon Street.com spoke with Wall Street Review on Jan. 6 2000.

Mike Green:

And welcome back everybody. It is a Thursday edition of Wall Street Review, with

Mike Green

and

Jim Benham

and today our very special guest is always is

Adam Lashinsky

, and he is the Silicon Valley columnist for

TheStreet.com

. Adam, how are you doing today?

Adam Lashinsky:

Doing great, how about yourself?

MG:

: Very good. Good to have you back on the show.

JB:

We should also point out he also writes the Wired Investor column for

Fortune Magazine.

AL:

Correct.

MG:

: Yes you do. And he used to be at the

San Jose Mercury News

, which is where I first became familiar with your writings.

JB:

A real Silicon Valley insider.

AL:

(laughing)Yeah, we can keep going if you want. Are we going to talk about the stock market?

JB:

(laughing) Former Pizza delivery boy.

MG:

: All right, I gotta ask you though with Silicon Valley do you have any feel for what people are thinking out there, working at all these firms with sky high stocks not so sky high anymore, options.

JB:

Beyond.com.

MG:

: It's gotta be a little bit difficult. Do you have any feel for what's going on over the last couple of days?

AL:

Yeah, you know I heard, I heard the expression secular rotation earlier today and I had to kind of scratch my head and say now what is that again? 'Cause it's been such a long time since I've ever heard that expression.

AL:

Clearly it's happening, you can't argue there's been a secular rotation in the last couple of days you know out of tech and into everything else like financials and what not. But you know, this will sound like one of the cheerleaders for the Valley but it's the truth.

AL:

I haven't spoken anyone, other than fund managers, whose funds have gone down, that overly concerned about this. When you're at a company that's up, you know a couple hundred points in three weeks and then it's down 75 or a 125 points, it's tough to get too worked up over that.

MG:

: Are the portfolio managers pretty much, that the reaction you're getting out of these people: been there, done that?

AL:

Well I've spoken to, no these are intensely competitive people and they don't like, they don't like to lose a nickel, y'know.

MG:

: Sure.

AL:

And I've spoken to some who are, who are upset if their funds, never mind that they were up a 120% last year.

MG:

: Right.

AL:

If they're down 15%-20% in the last two days, and those aren't extreme numbers'that is to say I'm not exaggerating, then they're not happy.

MG:

: Yeah.

JB:

Yeah, one thing I'd like to hear your thoughts on, and this is something you talked about. You were on the show on September 14 and I know you were, I don't know if you pounded the table but you were certainly bullish on business to business and I gotta say, at the time you were way ahead of that call because you said this was what we were going to hear about this year.

JB:

It really kicked into overdrive in the 4th quarter and indeed most of those, the big names were up smartly since that appearance so you were right on the money with this business to business focus. What's going on there with this FREE MARKETS and COMMERCE 1? What are your thoughts in general about business to business?

AL:

Sure, well let's go back a little bit to the beginning. Business to business, ecommerce is so big because business you know actually is a much bigger market than consumer products and everything we've seen on the web for he first 3 years or so of its development were consumer products like AMERICA ONLINE or AMAZON or EBAY or YAHOO.

AL:

We knew that once business to business came in that if you could find a way to make money from the giant markets out there like steel or oil or chemicals or plastics that they were big bucks in that. It was simply a matter of the easier to understand stories coming first, namely consumer stories and harder to understand stories coming second.

AL:

So now we've seen huge b-to-b plays in the last few months like Commerce 1, like Free Markets, ARIBA, and the list goes on and on and of course INTERNET CAPITAL GROUP. We're going to see a lot more of them.

MG:

: Okay, you know, if you could take us through an example because is obviously it's a term that everybody has become familiar with now but I think a lot who might be using it are brand new to it and may not fully understand what it means, so why don't you just give us an example of business to business.

AL:

Probably best to take one that's been, two that's been in the news a lot: Commerce 1 and Free Markets, both provide both a software and a service where buyers and sellers of industrial equipment can come together, not just industrial equipment but industrial products can come together on a website and can do an auction or reverse auction for the products that they're after.

AL:

Huge market opportunity, very unique and clever technology that helps them exactly what they want at the right price and there's really no need to market the product, you know, you don't take out ads on the Superbowl necessarily, it's more important that you get to widget makers and widget suppliers who might want on that exchange or online marketplace.

JB:

Let's leave this a little bit here and talk about some of your predictions because when we've had you on the show before you've been pretty much right on the money with some of your calls now, and I'm probably setting you up for a big fall here, but what do you see in 2000? What will be the same, relative to 1999 and what do you see as different?

AL:

Well one of the things I said in the column that I wrote in the beginning of the year, my year 2000 predictions where I made a little joke out of what the hot buzzword would be for the year and I let the people vote on it. Overwhelmingly people voted, the B-to-B would be the hot buzzword for 2000.

AL:

I don't think that's right and it's not that I'm not a fan of B-to-B but B-to-B came out of nowhere. Things move very quickly on the Internet, I think that relatively speaking B-to-B will go away as quickly as, as quickly as it arrived. So I don't see it being the big buzzword. I don't know necessarily will be the big buzzword toward the end of the year.

AL:

I think some very- obviously wireless is very hot, it's going to stay hot, PDAs: Personal Digital Assistants like HANDSPRING and PALM COMPUTING are going to be very hot and even though the president of SONY thinks that his company is overvalued, Sony is going to be very hot in that area as well.

JB:

What else do you look for next year and we should say this column you wrote is pretty fun to read cause you kinda gave people- it was sort of a little quiz and you could see if you answers meshed with what you were saying. But want about, you have

Jerry Sanders

over a AMD perhaps not making it through this year

AL:

Well Jerry Sanders is sort of the perennial candidate to guess that won't be around in this company that's just because this company has had, AMD has had so many ups and downs. I thought what was interesting, readers of TheStreet.com thought that George Bell of EXCITE@HOME wouldn't be around at this time next year.

JB:

I think I voted for him.

AL:

What's that, you did! (laughs) Strictly for fun on the personnel matters, I put out the opinion, despite all the rumors that Internet mayven Mary Meeker would not leave Morgan Stanley. A lot of readers agreed with me and I'm sticking to that, we'll find out very soon if that's right.

MG:

Taking a look here we were starting to see, sort of a flushing out of a lot of the net stocks and BEYOND.COM a victim here recently or actually maybe just reality catching up with the company itself.

MG:

We also see that in the likes of iVILLAGE. This company traded at such a high price now down to 18 and change. What types of companies or what companies do you think would be sort of vulnerable to that of move to the downside and what could we learn from the likes of the iVillages and the Beyond.coms?

AL:

Well this is a market that rewards the new so it's ok to be losing a lot of money but to be growing very quickly and to be in a new concept . So, therefore when you're a Free Markets of a VA/LENOX SYSTEMS and you're capitalizing on the LINUX free operating system buzz name, the market will say ok that's, we'll give you a ride for a while.

AL:

But if you're an iVillage, the idea is a little bit tired or if you're an Amazon and you are increasing your revenue but doing nothing to staunch the loses or if you're a Beyond.com whose business is kind of stalled and is maybe changing its strategy the market won't have any patience.

AL:

So, believe me, we'll keep seeing plenty of fresh ideas unless the market truly becomes undone in the next few weeks. The IPOs will keep coming and the market will keep wanting them. What the market doesn't want are last years old ideas that haven't shot the lights out since then.

JB:

And what will be'I was going about the IPO market given the recent volatility, actually downside volatility in a lot of these next stocks, will it be as easy to hit those next eight home runs and what are some of the names we should look for next year that are actual viable, good, long term candidates that will be IPOs?

AL:

Despite the mood of today, there's absolutely no indication that we've left behind the time when the IPOs pop on their first day, let me just say that. And remember in the beginning of the year we're not getting any IPOs yet because people weren't going on their road shows during Christmas time so it'll take a couple weeks yet.

AL:

You know in my year-end or year forward prediction quiz, I highlighted what some of the juicer IPOs will be. I mentioned Palm and Handspring already, ALTA VISTA is going to be a giant valuation when it goes public, HOME GROCER, of course, which is the competitor to WEB VAN and is backed by KLINER PERKINS and Amazon is planning to go public.

AL:

And what I think is the sleeper is a company called UNIVERSAL ACCESS which is a telecommunications service provider in Chicago of places that has filed to go public that's backed by INTERNET CAPITAL GROUP and others. And again the key is how much they pop on the first day, you're asking me are they going to be long-term keepers. I read in Morgan Stanley's report on Free Markets where they said,

Mary Meeker

said the risk on Free Markets may be not owning it. I don't know, I find that extremely hard to stomach.

MG:

: She is the Queen of the Internet.

AL:

She is indeed. And she's used that line before. She said about Yahoo that the real risk here, at very high levels, two years ago, she said is not owning it and she was absolutely right. So you gotta sort of pause and take a big gulp and think about it.

MG:

: Adam we talked a little bit earlier about the IPO calendar, not a lot going on right now because no one was doing, as you pointed out their road shows over the Christmas time period but now that we're through the holidays and all that good stuff what does the calendar look like, how full is it moving forward for the IPO market when it comes to the tech stocks.

AL:

Well it's going to jammed and there's this virtuous or un-virtuous cycle going on depending on how you want to look at it, but the Valley and Wall Street are just a-washed in cash and the cash is flowing at every level.

AL:

It's flowing at the earliest stages of seed-venture capital up through mezzanine round funds which are just before IPO funds and then into hedge funds that are managing public money. There's literally hundreds of millions of dollars being invested, never mind what happened the past two days -- barely a blip compared to amount that's been invested and that's been made, so all sorts of fund managers are going around looking for IPOs to buy.

AL:

There's- right now there's no reason to assume at least in the 1st quarter it won't be a huge market again.

JB:

And of the big ones you're mentioning here and I guess KRISPY KREME Donuts was kind of a joke I guessing?

AL:

Yes it was (laughing). They are filed to go public by the way but it's not in my area of coverage.

JB:

Krispy.com, anyway of these other four the serious ones: Alta Vista, I think every knows that's a search engine; Palm, of course is the spin-off from 3COM; Home Grocer. We're all familiar with Web Van but Universal Access might be the one our listeners aren't as familiar with.

JB:

I know I am not as familiar with Universal Access but yet you have it as one of the big one. What exactly do they do and why will it be so big?

AL:

I'm going to dodge you slightly. Of course I'm not saying it's going to be big but I'll tell you a little bit about it. I'll tell you that you know.

AL:

What I do is I talk to tons of people all the time and I sort of make mental notes when the people who I respect tell me you know, that we think that this one is going to hot.

AL:

I remember a couple of years ago I did a prediction that said that BROADCOM which no one had heard of was going to be a really, really interesting IPO in 1998.

JB:

It's done pretty well (laughs)!

AL:

It's done ok, yeah. This company provisions, they purchase and provision telecommunication services for corporate America. The way it's been explained to me, you'd think that going out and buying your phone service if your were a big company was an easy thing to do but apparently it's complicated.

AL:

The pricing is screwy. It's a bunch- it's a big hassle to do it, this company does it for its clients, that's how I understand it. I haven't dug deep into it, their S1 is on the free EDGAR sites for anyone to read so if someone's interested on this one they should read about their business on the web. I have not written about this company yet.

JB:

Yeah, looks like it just stands out compare to those big sort of, almost household Internet names.

AL:

It's unusual, I try to spice it up a little bit by giving you something to chew on that you might not have expected.

JB:

Well we're almost out of time. What's next on your plate? What are you going to be writing about coming soon and for the rest of the year, just more of the same? (laughing)

AL:

Well you know, I'm always looking for the next big thing, you know, I don't want to do just more of the same.

JB:

I mean more of the same, huge predictions.

AL:

Oh gosh I don't know, I'll make a prediction right now, I mean if you sort of been sitting out -- if you've been sitting out on tech then the past few days and maybe let's say the next several weeks are just the greatest thing you could have hoped for because to think that the tech stock market going away would just be ludicrous.

AL:

I think it'll be very interesting to see how the market reacts tomorrow to Lucent. Because at first glance it looks like a really aggressive, really promotional company that has stumbled and it doesn't look like to me that the market for buying communications products is evaporating. We'll find that out in the next few weeks.

MG:

I think that router and switch hearing thing is over with (laughing), just gone.

JB:

Well the stock's down $20 bucks right now in after hours if you can believe that.

MG:

Hey we're not going to hold it, is this a quick spike to the down side or a looong protracted Bear market?

AL:

I think it's a spike it's a spike to the down side, that's what my gut tells me but what does my gut know.

MG:

Hey as much as we know.

JB:

Exactly.

MG:

All right, hey Adam thanks so much. We will talk to you again very soon. Keep up the great work.

AL:

Thanks guys I appreciate it.

JB:

All right thanks Adam.