Participants on May 13 included host Brenda Buttner, Herb Greenberg, Jim Seymour, Gary B. Smith, Adam Lashinsky, and guest Andrew Cupps. The transcript is unedited, and phonetic spellings are indicated with (ph).

BRENDA BUTTNER, HOST:

Hi, everyone. I'm Brenda Buttner. And you are connected to "TheStreet.com." We're here to help you make your own investing decisions.

The markets finished last week up, but not before big names

Cisco Systems

,

Sun

,

Microsoft

give investors a big scare. What happens next? Let's get the "Word on the Street."

With us from

TheStreet.com

, senior columnist Herb Greenberg. And in Washington, DC, our "Chartman" Gary B. Smith. From San Francisco, Silicon Valley columnist Adam Lashinsky. And in Austin, columnist Jim Seymour.

Also joining us here in the studio, Andrew Cupps. He's portfolio manager of the $800 million

Strong Enterprise Fund

, which is up over 90 % in the last year.

Welcome, everybody.

First topic, tech leaders. In tough times investors run to them. But is that always the best place to go? Not recently. Just take a look at what happened to some giants just last week. Jim Seymour, if tech's best can't hold on, what does it mean for the rest of the sector?

JIM SEYMOUR, COLUMNIST:

There's madness afoot in the market, Brenda. This is really a strange time.

This week, we saw Cisco come in with one of the great quarters, a legendary quarter. And it wasn't enough. If earnings don't count, it's hard to understand what is going to count. This is a dangerous time even to try the traditional strategy of fleeing to the leaders, to the big ones.

We're in a situation where it's tough to figure what to do. People traditionally have gone to the leaders or have gone to catch. And you're not seeing that.

HERB GREENBERG, SENIOR COLUMNIST:

You know, Jim, this is Herb. I think that's fascinating as people talk about leaders. And sometimes you look at the growth of some of these leaders.

One company I've been writing about lately is

Dell Computer

. And when you look at Dell, which is a leader, and which people want to think of as a leader, which helped this market last week, operating earnings were up only 4%.

Is that a leader? This is the kind of thing certainly a number of people I know are talking about.

BUTTNER:

Well, Adam, actually leaders don't always go up. Is that true?

ADAM LASHINSKY, SILICON VALLEY COLUMNIST:

That's right. Leaders will lead you up in good times. And they'll lead you down in bad times. And you know, I find what Jim's saying is that this is all a little strange. I find that a little strange.

Cisco is a very much a leader. And yes, it did have a good report. But really if you look at the company in past good reports, it led the market way, way, way, way, way up. That wasn't normal. That was a little bit strange.

So I don't know. I think it's very depressing for people who own these stocks to see them going down. But I don't know how strange a time it is, is what I'm saying.

BUTTNER:

Well, Gary, you actually think that it's going to go down quite a bit more. You've charted Cisco, and it's a pretty ugly one for people who invest in the stock.

GARY B. SMITH, "CHARTMAN":

Well, I'll talk about the chart in a second. Here's a stock that I really think is down to one leg. I mean, and this is a stock that if it breaks out of the fifties -- it was in the eighties, then the seventies, now down into the fifties -- if this breaks down below 50, this could really sail down.

Let me get down to Jim's first point. What I don't understand in all the fundamentals is they always talk about, "Wow, this was such a great quarter. All the earnings were fantastic." What is the earnings growth of the company? What are you paying for those earnings?

I mean, sure they had great earnings, Jim. But what's the P/E on the company, a zillion?

ANDREW CUPPS, PORTFOLIO MANAGER, STRONG ENTERPRISE FUND:

I think that's the missing component here in this debate: valuation. We've been trained over the last couple of years that the story makes the direction of the stock. And that's not always the case. There's this missing component called valuation.

BUTTNER:

But nobody cared about that just a few moments...

(CROSSTALK)

BUTTNER:

... Yeah, exactly. Why now?

SEYMOUR:

In fact, it's been true that Cisco has been able to carry that off...

(CROSSTALK)

BUTTNER:

Go ahead.

SEYMOUR:

... Cisco has been able to carry that off. It does have a very high, a silly P/E if you want to look at it that way.

But Cisco's ability to use its relatively cheap stock as a cheap currency to go through acquisitions has been a sound strategy until now. The trouble now is to worry whether as they make this transition from mainly selling routers to selling optical goods whether they can continue to acquire, which is what they have to do.

BUTTNER:

But Jim, you own Cisco, yes?

SEYMOUR:

I'm long Cisco. I'm not as long Cisco as I was a couple of weeks ago.

BUTTNER:

Well, what do you do with it? Most people do own this, whether as an individual stock or as a mutual fund. If you think this is on the way down, it's going to be an ugly market. Do you take some money off the table now?

SEYMOUR:

Absolutely. It is time to take some money off the table not only in Cisco but in other leaders as well, even though I think as I've said before on the show, we're going to have a big fall. I think as we enter the summer and we have a difficult summer for even the leaders in tech, it's smart to take some money off the table now so you don't lose your capital over the summer.

BUTTNER:

Drew, isn't that just market timing?

CUPPS:

Well, I think that we have to think about where the opportunities are here. We've had a tech correction. There's no two ways about that.

And we have certain segments of the market, small and even some of the mid-cap stocks down 60%, 70%, 80%. Then we have the leaders down 15%, 20%, maybe 25%.

If everything was somewhat fair going into it, where are the opportunities now? We know business is great across the board. Some stocks are down 75%. Some stocks are down 25%. I'd rather gravitate towards the ones that are down 75%.

BUTTNER:

OK, all right, Gary...

SMITH:

Like what, Andrew?

BUTTNER:

... Actually, Gary, you had mentioned Cisco. I just want to be sure to get the chart in this segment.

SMITH:

Yeah, well, here I was talking about one of the generals. And this is a general, it's not Grant. It's more Custer I think in this case.

(LAUGHTER)

SMITH:

You know, I would even be willing -- I have shorted Cisco. I have shorted Oracle. I don't know if now is the optimal time.

But I certainly wouldn't play any of these stocks right now on the long side of me. And that's for bottom dippers only. And I think bottom dipping in a bear market -- and I think we are in a bear market with technologies -- is ludicrous.

BUTTNER:

And even though you were bullish last week, you're totally out of the market now?

SMITH:

No, no, no, no, I went bearish last week.

(LAUGHTER)

BUTTNER:

Well, it's hard to keep track, Gary.

(CROSSTALK)

BUTTNER:

Herb, last word.

GREENBERG:

The bottom line on these companies is they are no safe havens right now unless you're going to keep averaging down and buying dollar cost averaging on the way down.

BUTTNER:

All right, that's the last word for "Word on the Street." Andrew Cupps from Strong Enterprise Fund, we'll see you in a few minutes when you tell us your favorite stocks.

But next, a stock that's bucking the bear market in a big way. Does the "Chartman" think it's going even higher? Find out next.

BUTTNER:

Welcome back.

So where are the winners? It's not so easy to answer these days. But the "Chartman" says he's got it figured out.

And Gary B. Smith is back along with Adam Lashinsky. Neither owns a stock mentioned in this segment.

I could hear you arguing all the way from here when we asked the question what's the best play in this up and down market? And not surprisingly, it seems you've come out on opposite ends of the spectrum here.

Gary, you first. What's your winner?

SMITH:

Well, I like the whole oil sector, oil services. You can't just choose any oil stock like you can't choose any technology stock.

But I like

Nabors Industries

. I think this is a fantastic stock. It's funny, I get so many emails from people asking me to look at technology stocks. Finally, someone said, "Why don't you look at the oil sector? It's the only strong one out there."

Nabors Industries is a fantastic stock, had a huge run up in March. And all it did through all the turmoil is move sideways. And then just a few days ago, it broke up again.

If you are going to go long in this market, Nabors is the kind of stock you want. I think this stock can go up into the 50 range, probably a little bit more.

BUTTNER:

Adam, Gary says you can't just choose any oil stock. But -- and this stock is up significantly so far this year, about 30%. But it's a driller. So is the success really because of the stock or the sector?

LASHINSKY:

Yeah, actually, I think Gary just did choose any energy stock.

(LAUGHTER)

LASHINSKY:

That's my read anyway. Gary forced me to...

SMITH:

Yeah, thank you.

LASHINSKY:

... you're welcome. He forced me to get out of Silicon Valley and go to the oil patch this week. And he chose Nabors Industries.

I think we probably could have chosen anyone. Natural gas is hot. We're at the beginning of an up cycle in the energy industry. And especially in drilling in North America, the industry just gets out of a region like North America in the down cycle. It gets back in the up cycle. And we're at the beginning of that.

The company manages cost well, especially after a recent acquisition. And there's even room for global growth. It's one of the leaders. It supplies the top companies that explore and product oil and natural gas. The people I spoke to in the oil patch last week said there's plenty of room to grow in the stock.

BUTTNER:

But Adam, you think that there's a better bet in this market.

LASHINSKY:

No, actually I think this is something where Gary's people -- or his charts if you like -- I guess those are indistinguishable, right Gary?

SMITH:

Exactly.

LASHINSKY:

They're giving him a pretty good message. He can see the charts. He can see what is working. And I think in the short-term trading, that's as good a play as any.

BUTTNER:

Right, but if you had to choose one stock, your winner, what would it be?

LASHINSKY:

Oh, well, we'll come to that next...

BUTTNER:

Right now. Go ahead.

LASHINSKY:

... I would choose

PMC-Sierra

. So that's where we go.

PMC-Sierra is a company that makes semiconductors that supply the communications industry. And the growth has just been spectacular there, 40% year over year earnings-per-share growth, 80%-plus gross margins on its networking products.

As I said, it supplies everybody from its biggest customers

Lucent

and Cisco on down to tiny little start-ups. But now I'm going to tip my hat to Gary. This is trading at the whim of the market right now. It's extremely overvalued.

And if things continue to be rocky in tech, it will go down. This is something you want to own for the long haul: a big, huge winner.

BUTTNER:

And Gary, talk about rocky. Boy, the chip company's chart shows how the market can bounce this around, doesn't it?

SMITH:

Well, FYI for Adam. Adam, all stocks trade at the whim of the market.

(LAUGHTER)

SMITH:

No one is impervious, first of all.

LASHINSKY:

Fair enough.

SMITH:

I think Adam is resting here on a stock that was great months ago. As Adam points out, it is not great now.

What this stock has done is form a big, huge triangle. Forget the term triangle. What it's done is just formed a big period of indecision. And just a few days ago, it broke down on heavy volume.

What that means is this stock is going down. It's trading around the mid-100s. Now this stock is going to go to the low 100s.

In fact, just yesterday, Friday, it tried to make a rally with the rest of the

Nasdaq

. It was just miserable on low volume. End of the day, it ended down. And that's where this stock is going to continue to go.

If you like Adam's spiel, then believe me you're going to be able to buy PMC-Sierra for a lot cheaper than it is now.

LASHINSKY:

And Brenda, I have less of an argument with Gary than he thinks. He may well be giving people a good near-term trading strategy. The question is, is it a great company, and did it break down? Yes and no to those two questions.

SMITH:

Oh, you want to have it all ways, don't you, Adam?

BUTTNER:

Well, why not? All right, Gary and Adam, thanks to both of you. But don't go too far. We'll need you both later on in the show for "Predictions."

But up next, our guest stock picker's fund is up over 90 % in the last year. You like that number? Well, find out what he likes now. "Stock Drill" when we come back.

BUTTNER:

Let's do the "Stock Drill." Andrew Cupps from the Strong Enterprise Fund is our stock picker.

He thinks you should check out

BroadVision

and

National Semiconductor

. His fund holds both.

Herb Greenberg and Jim Seymour will put these stocks to the test. Herb and Jim do not own either stock.

First up, BroadVision. Now here's why Drew likes it: First, it's a dominant player in Internet software. And he says the firm can double earnings estimates next year. Plus, the company's revenue growth looks really good to him.

Now Herb, this really is the company to beat in the industry. It's a credible market opportunity. E-tailers, retailers falling all over themselves to buy this software.

GREENBERG:

And some of them falling away too. And that's the key issue here. This is the main vendor of software to a lot of the Internet companies, especially some of these VC-backed companies.

Now we're in a market where you have sort of some of these companies not getting the backing. What happens if suddenly no customers or fewer customers?

SEYMOUR:

Sure. You also have to recognize that we're at a difficult time in the market for Broad Vision. There's new tech, there's old tech, and there's dull tech.

And in fact, BroadVision has become dull tech. They had a nice run-up this year. And I think they'll do all right later this year...

BUTTNER:

All right.

SEYMOUR:

... But with the market timing problems now, it's tough.

CUPPS:

I think both of you are off a little bit...

(CROSSTALK)

BUTTNER:

Let Drew have his say.

CUPPS:

... The majority of the customers are the established

Fortune

500,

Fortune

1000 companies, Home Depot being a perfect example. And I also think that we're at a great time for BroadVision because they're just hitting the knee of the curve, as we say in technology, where they're starting to leverage the channels of the

Arthur Andersens

of the world and the

Proxicoms

and the Internet consultants.

GREENBERG:

But don't they have a very -- they have a very expensive product?

CUPPS:

Like all software, they have an expensive enterprise-wide solution. Right.

BUTTNER:

OK, got to move on to your other stock, Drew, National Semiconductor. You say the stock is cheap, that the company made a good decision by not competing directly with

Intel

. And you also like the firm's exposure to two attractive segments of the market, mobile handsets and information appliances.

Jim, it really is relatively reasonably priced for a chip maker. Its books are improving. Any cause for concern?

SEYMOUR:

I think Andrew has a pretty good pick with National Semi because it does have its new business. It's got its set-top box business. It's got other... It's got its mobile phone business. It's doing well.

The problem with National Semi that worries me is, first, overall timing. The market is not in love with stocks like this now. And we have to stop confusing a company and its stock. We're talking about stock prices here.

Second, National Semiconductor has been a heartbreaker for 20 years. With their old 16-0-16 (ph) and 32-0-32 (ph) chips back in the 1980s, they should have been Intel. They should have controlled the CPU business for PCs.

GREENBERG:

That's a great point.

BUTTNER:

Hold on, hold on, let Drew answer to that.

CUPPS:

I think that actually that is a good point. And that's where the opportunity is. This is a semiconductor stock. Remember, a semiconductor stock trading at 16, 17 times next year's earnings in contrast to PMC-Sierra at 150 times...

GREENBERG:

But this is...

CUPPS:

... And we have a restructuring going on.

BUTTNER:

Is it cheap for a reason, Herb?

(CROSSTALK)

GREENBERG:

Yeah, that's the question. It's cheap for a reason. It's a could-have-would-have- should-have stock. And the question is can they get their act together? February, very uneven bookings. So there's still a little...

SEYMOUR:

We've also got a sector here that the market has not liked, that has not done well. We had a bad week for the sector.

This is also a stock in National Semi's case which has had even more volatility, 25% or 30% more volatility than the Nasdaq. If we have people fleeing the Nasdaq's volatility, are they going to pay attention to National Semi's prospects?

BUTTNER:

All right, last word, Drew.

CUPPS:

One place they might go to is a stock with 17 P/E where business is booming. And I think that might be National Semi.

BUTTNER:

All right, Andrew Cupps from the Strong Enterprise Fund, thanks so much for being with us.

But up next, is tech dead until the fall? Some "Predictions" from our group that might surprise you when we return.

BUTTNER:

Welcome back. You want them? Well, we've got them. "Predictions."

Herb, Gary B., Adam and Jim are back with us.

OK, up first, Herb.

GREENBERG:

You know, my earlier prediction at one point on the Nasdaq is that it would fall to 3225. It got to 3227. I say by month's end, 3225.

BUTTNER:

And that is significant because?

GREENBERG:

Because by then it would be 35% from the crash, which is my old silly reason...

BUTTNER:

Oh, that 35% again. Right now it's at 3529.

GREENBERG:

... Right.

SEYMOUR:

Herb, you've been depressingly accurate.

(LAUGHTER)

SMITH:

Does it hold there, Herb?

GREENBERG:

Does it hold? No, of course it doesn't hold there. This market doesn't hold anywhere.

(CROSSTALK)

BUTTNER:

Which way does it go, down?

GREENBERG:

Fifty-percent chance it goes either way.

LASHINSKY:

Oh, gee, that's really helpful, thanks.

BUTTNER:

Gary...

(LAUGHTER)

SMITH:

Yeah, really helpful.

BUTTNER:

Gary, you've been bearish. Do you think it's going to reach those levels? Do your charts say so?

SMITH:

I said last week Nasdaq 3000. I'm sticking to it.

BUTTNER:

OK.

SMITH:

I definitely think 3000.

BUTTNER:

And time for your "Prediction," Mr. Chartman.

SMITH:

All right. I think -- let's see, the

Fed

meets next week. We get that silly rally after the Fed. Everyone thinks that the green light is on. And it's yet another bear rally.

I bet it comes on low volume. And it bet we get the same thing as we've had repeatedly for the last few weeks now. It fades. People sell into it, sell short. And we keep on going down.

LASHINSKY:

Gary, explain why the rally would be silly if the Fed raises 50 basis points.

SMITH:

Well, what is the great environment? Now you've got a Fed that is going to keep on tightening. If they go 25, you know they're going to do more. If you go 50, you're not even...

GREENBERG:

Well, that's it because, Gary, what you end up with is the next cycle of indicators from the government. We're going to have one at least...

SMITH:

... Absolutely.

GREENBERG:

... that's going to scare people.

BUTTNER:

Uh-oh.

LASHINSKY:

That sure sounds like fundamental analysis, Gary.

BUTTNER:

I know. That's what I'm saying. Gary's really paying attention to those fundamentals.

SMITH:

Well, no, it is -- I do know a little about fundamentals...

(LAUGHTER)

BUTTNER:

Watch yourself, Gary. OK, all right.

SMITH:

... All I'm looking at is the last few rallies. And they've all come on low volume. I just think this one will be the same.

BUTTNER:

All right, Adam, you're up next.

SEYMOUR:

Gary, you're trainable. That's good news.

(LAUGHTER)

BUTTNER:

Adam, you're up next.

LASHINSKY:

All right. We've been expecting there's going to be a mega deal in the dot-com world. And I think I've got it. We're going to see a merger before the end of the summer between Lycos and

AltaVista

former lovers, since divorced. Might get back together again.

GREENBERG:

Wait a minute. Who's the winner here in this deal because Lycos hasn't been able to do any deal?

BUTTNER:

Well, they're talking about -- there are some rumors that there may be a deal with Terra.

LASHINSKY:

Correct. And Alta Vista hasn't been able to do the big deal that it wants to do, which is its IPO. So the winner is taking a competitor out for both of them.

Alta Vista hasn't been able to move up in the page views. This would create something of a giant to compete against the other dot.com giants.

BUTTNER:

Jim, what's going to happen, and why do we care?

SEYMOUR:

You know, summer has traditionally been a bad time to be in techs because we've seen a lot of price wobbling, low volume, people didn't care, and with city source (ph) and price erosion. And traditionally, the way to avoid that has been to move into the market leaders, the big names, the Intels, the Microsofts, the Ciscos.

I think this summer is going to be a dangerous summer, even for those market leaders. I think it's time to take some money off the table, to scale out of positions in tech generally.

I think after Sept. 1, we're going to go crazy again. And I still think we're going to see 4,800 by Christmas. But that action is going to be October, November, December.

GREENBERG:

Wait a minute, wait a minute, what's the magic? You gave me trouble a few weeks ago for my numbers of 3225. What's the magic of Sept. 1?

SEYMOUR:

There's no magic. But people come back from Long Island. People come back to work. They get serious about what they're doing. And finally, they realize the ultimate secret of this market. If you want to make money, you've got to be in tech. When tech's moving, you've got to be there.

LASHINSKY:

But if you can do your trading in peace and quiet, why not do your buying in July and August and be prepared for Sept. 1?

BUTTNER:

You're just a harder worker than most.

(LAUGHTER)

BUTTNER:

OK, guys, thanks so much.

And what do you think? Let us know. Log on to

TheStreet.com

Web site and go to our TV page. From there, you can rate the predictions and send us a question or a comment.

And thanks so much for joining us. We'll see you here again next week. Until then, we hope that you invest wisely.

END

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