Internet Stocks for 2000, Part Two

by Hal Plotkin
Silicon Valley Correspondent

In part one of this story, we looked at three Internet stocks analysts like for 2000: Puma Technology Inc. {PUMA}, RealNetworks Inc. {RNWK}, and Modem Media.Poppe Tyson Inc. {MMPT}. In part two, we look at three more: Juniper Networks Inc., Systems & Computer Technology Corp. {SCTC} and VeriSign Inc. {VRSN}.

Internet Stocks for 2000, Part One

Juniper Networks {JNPR}

Paul Weinstein, an analyst at Credit Suisse First Boston, calls Juniper Networks a “category-defining company”

“Juniper is the first company to come to market with a purpose-built, next-generation, hardware/software solution designed for the core of service provider’s networks,” Weinstein said in an e-mail interview. “As previous category-defining companies have done in the past, Juniper has the opportunity to capture a large share of the market opportunity from entrenched competitors. Like other category-defining companies, it deserves a significant valuation premium.”

Weinstein says Juniper has real products and real customers, enjoys the protection of significant barriers to entry in its core market, is addressing a rapidly expanding market, holds a lead in technology that differentiates it from competitors and has a highly experienced management team.

Juniper Networks 52-Week Stock-Performance Chart

Weinstein also likes Applied Micro Circuits Corp. {AMCC}, Broadcom Corp. {BRCM}, CacheFlow Inc. {CFLO}, Cisco Systems Inc. {CSCO}, Clarent Corp. {CLRN}, Efficient Networks Inc. {EFNT}, Gadzoox Networks Inc. {ZOOX}, Sycamore Networks Inc. {SCMR} and Xircom Inc. {XIRC}.

Systems & Computer Technology {SCTC} Richard Williams, an analyst at Jefferies & Co., puts Systems & Computer Technology at the top of his list, setting a 12-month price target of $20 for the stock.

Systems & Computer Technology 52-Week Stock-Performance Chart

“SCTC’s Investment in Campus Pipeline may be worth $5 to $10 a share at an IPO next year,” Williams wrote in a recent research report. The rest of the business is very attractive once Y2K ends. Process manufacturing and utilities are hurting but will have to use software and e-commerce or risk being Amazon’d. SCTC has great technology and also a distance-learning suite that could be an IPO down the road.”

Williams says there is still a lot of low-hanging fruit in Systems & Computer Technology’s core manufacturing and utility markets.

“Growth rates for process manufacturing and utilities are expected to run over 50 percent compound annual growth rate for three to five years, according to the Gartner Group,” Williams wrote in the report. “SCTC is uniquely qualified to address the specific needs of each of its vertical markets, once the Y2K pressures ease for utilities and manufacturers.”

The analyst’s other Internet stock picks for 2000 are Aspen Technology Inc. {AZPN}, BEA Systems Inc. {BEAS}, HNC Software Inc. {HNCS}, Hyperion Solutions Corp. {HYSL}, Network Associates Inc. {NETA} and Wind River Systems Inc. {WIND}.

VeriSign {VRSN}

Stephen Sigmond, an analyst at Dain Rauscher Wessels, puts VeriSign at the top of his list, setting a 12-month price target of $200.

VeriSign 52-Week Stock-Performance Chart

Sigmond says VeriSign’s recent acquisitions of Signio and Thawte solidify the company’s market dominance. “It’s game over,” he says.

“The acquisitions are expected to add 5 percent to 10 percent to VeriSign’s revenues in 2000, and 15 percent to 20 percent in 2001,” Sigmond wrote in a Dec. 20 report. “On a pro-forma basis, VeriSign expects operating losses in the first two quarters of 2000, break-even in the third quarter, and operating profitability in the December quarter.”

The Signio acquisition marks VeriSign’s entry into the significantly underpenetrated and rapidly accelerating world of Internet payments. By acquiring Thawte, VeriSign has co-opted one of the only long-term threats to its digital certificate franchise. We believe both acquisitions are excellent strategic moves that will enhance VeriSign’s long-term business model and competitive advantage.”

Sigmond also likes Ariba Inc. {ARBA}, Inktomi Corp. {INKT}, Vignette Corp. {VIGN} and WebTrends Corp. {WEBT}.

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