John Edwards Chat on AOL

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John J. Edwards III chatted on AOL MarketTalk on May 3. AOL's MarketTalk is hosted by Sage Online (Keyword: PF Live).

Sage Lion:

Sage is proud to introduce Mr. John Edwards, Markets Editor for

TheStreet.com

!

JEdwards:

Hi, great to be here.

Question:

Why do you think America Online dropped after having released such a strong earnings announcement?

JEdwards:

I think AOL, along with a lot of the Internet stocks, found itself in a position where it had run up so strongly in advance of the numbers, that there was almost no earnings number that could lead to further immediate appreciation.

JEdwards:

It could be that the enthusiasm, ahead of the reports from AOL and AMAZON got a bit ahead of itself.

Question:

Do you feel Oracle is a good value at this time?

JEdwards:

I can't comment on individual stocks.

Question:

Have the Internet stocks been affected by the Amazon earnings? How long do you think the sector will be down?

JEdwards:

I think the Net sector has been affected more generally by extremely high expectations. Coupled with perhaps an excess of speculation that has driven the shares up, probably faster than they should have risen.

JEdwards:

We may be in a period where the market is trying to reassess valuations in the sector and perhaps come up with more realistic levels.

Question:

Will software consulting and enterprise resource management software companies continue to be hurt by Year 2K softness?

JEdwards:

I think the Y2K concerns are starting to play a larger and larger role in investors' thinking so that might be an area to tread cautiously until we have more solid evidence of how the Y2K spending is really shaking out.

Question:

Your opinion on the Online Auction Companies, please!

JEdwards:

I think overall the auction houses, like many Internet companies, have probably gotten ahead of themselves in terms of valuation. While the sector is definitely an exciting one with lots of growth potential.

JEdwards:

It's hard to see these stocks justifying their valuation when they begin to be perceived merely as auction houses and not as Internet plays.

Question:

Was today a good day to buy techs, or do you see further correction?

JEdwards:

I think that depends on your time horizon here. While there may be very short-term trades to be made in the tech area, it seems likely that there's more broadening ahead for the market, which could keep tech stocks somewhat reined in the couple of months ahead.

Question:

Hi Mr.Edwards! When should we expect your IPO to hit the market? Will it be available at IPO.com or Etrade.com?

JEdwards:

Well, we're in our quiet period so can't really comment too much on that but I believe our prospectus is available and that should give you some background on the offering.

Question:

John, how will the purchase of VLSI tech. affect Philips' share price?

JEdwards:

The market seems to like the Philips acquisition of the VLSI, and as we see the stock rising today on the announcement Which is somewhat unusual in the case of the stock of an acquiring company.

JEdwards:

So not really knowing too much about the companies involved, I would say this reaction seems to bode fairly well.

Question:

Do you think the oil service sector will come back over the next two to three years?

JEdwards:

It seems that there may be some further appreciation had in oil service given the prospects for recovery in especially in Asian companies.

JEdwards:

But the supply of oil worldwide is proving to be much larger than had been thought and so that might constrain oil prices and therefore diminish the business that the oil service companies see.

Question:

Where are you looking to see the most fluctuations regarding Y2k?

JEdwards:

I would say that enterprise software companies might see significant fluctuations in their business. As there's a conflict between companies accelerating their software spending in a final Y2K push, and companies holding off on software spending until they see how the end of the year turns out.

Question:

What economic or market conditions would have to change for small caps to begin to outperform large caps?

JEdwards:

In the market we would have to see a widespread abandonment of the current comfort with high valuations for larger companies.

JEdwards:

And economically it's hard to say, given that the economic strength we've seen should have been much more beneficial to small companies than it has been.

Sage Lion:

Thank you for visiting with us today Mr. Edwards! Any parting shots?

JEdwards:

Good luck out there and happy trading.