Remember telecom? You know, that wacky group of stocks that was supposed to make us all wildly rich because every single man, woman and dog in the developed world would one day log onto the Internet simultaneously? Remember how all those people in India and China were supposed to go straight from rice-planting to instant messaging? There were a hundred ways to play this idea: telephone carriers, switch makers, component makers, subcomponent makers, software makers and service providers. In the late '90s, we could recite the names of these leading companies like choirboys reciting a capitalist catechism. Most of the zanier outliers of telecom's Class of '99 have met their makers. But a few hardware makers survived. The best ones shot up in value last year, but many have spent most of 2004 sinking straight back down.
Surviving the Bust
Let's spend a few moments looking at the most able of the walking wounded. Many of these stocks are deservedly 98% off their 2000 highs, but perhaps undeservedly 50% off their much lower January 2004 highs. Scarred but not dead, they represent ways to play a version of the '90s Big Vision that is slowly becoming rather real amid considerable skepticism. Tops on the list is JDS Uniphase ( JDSU), the granddaddy of them all. Shares of this major maker of fiber-optic components fetched 27 cents, adjusted for splits, back in 1993 when the Internet was just a gleam in futurists' eyes. Ultimately, the stock rose as high as $153 in March 2000 when the hype was on high heat. Then the line went dead. Shares sank to $1.96 again by October 2002, then rallied as high as $5.89 in January before sliding back to the mid-$3 range in recent days. So is the company fairly priced now, or is the stock poised for a return to pennies?