Beaten-Down Bargains - technology stocks - Brief Article

Kiplinger's Personal Finance Magazine,  June, 2000  by Manuel Schiffres

Tags: Computer Associates International Inc., FINANCE, Investment, Nasdaq Stock Market Inc., Parametric Technology Corp.

• E-mail
• Print
• Link

These four tech stocks now look attractive.

There's a lot more value in the technology sector than there was just two months ago. Marc Klee, who with partner Barry Gordon has run John Hancock Global Technology fund (800-257-3336) since 1983 (making him a veteran in the sector), identifies some depressed but attractive tech stocks.

* Applied Science & Technology (symbol ASTX, Nasdaq, recent price $25). Applied Science makes components and subsystems that are incorporated in semiconductor-manufacturing equipment produced by companies such as Applied Materials (the firm's largest customer) and Lam Research. "Business for semiconductor-manufacturing equipment is robust, and as Applied Materials' business moves up, it comes right back to Applied Science," says Klee. With the stock off from a 52-week high of $45, it sells at about 19 times consensus calendar 2000 earnings estimates of $1.30 per share. Earnings should grow 25% to 30% a year over the next three to five years, says Klee.

* Computer Associates (CA, New York Stock Exchange, $53). Shares of this seasoned, broad-based software company are down "only" 30% from a 52-week high of $79, leaving the stock at about 14 times estimated calendar 2000 earnings of $3.66 per share. It's that cheap, says Klee, because CA is perceived primarily as a provider of software for large, mainframe computers; because the company has had a history of strained relations with customers; and because CA has done such a good job of wringing expenses out of companies it has acquired, there's little room to boost profit margins. Actually, says Klee, CA's line of more than 500 products is far broader than the company is given credit for; its relations with customers are improving; and CA is bound to make more acquisitions, something at which it is very good.

* Parametric Technology (PMTC, Nasdaq, $8). Parametric's stock, which had been as high as $36, plunged in early April after the software developer "preannounced" disappointing quarterly earnings. The shortfall in Parametric's core business-mechanical computer-aided design-was understandable, Klee says. What was more disappointing, he says, were the results for its supposedly fast-growing Windchill product, which allows manufacturers to collaborate with customers and suppliers over the Internet. "The company has to regain credibility with Windchill," says Klee. "If management meets projections, the stock could triple within 12 months."

* Primus Telecommunications (PRTL, Nasdaq, $26). During the tech rout, shares of this U.S. and international carrier of voice, data and Internet services fell 50% from their 52-week high of $52. Hewlett-Packard recently said that it would invest up to $50 million in Primus and that the two companies would collaborate in building four so-called Web-hosting centers in the U.S. Primus isn't profitable but has begun generating positive cash flow. Klee says that given rampant consolidation in the telecommunications industry, he wouldn't be surprised if Primus were eventually bought.

COPYRIGHT 2000 The Kiplinger Washington Editors, Inc.
COPYRIGHT 2000 Gale Group