For Subscribers

Get the complete article now!

Five analysts and top management from sixteen sector firms examine the technology sector in this special 91-page Internet Infrastructure issue from The Wall Street Transcript, available at (212/952-7433) or http://www.twst.com/info/info452.htm

TWST: Olivia, what has September 11 meant to your group of companies?

Ms. Golden: Well, related to security specifically, we think September 11 may have benefited security stocks the most. What we’ve seen from the government sector is a heightened awareness regarding Internet security. President Bush has appointed Richard Clark as his cybersecurities guard; he in turn has introduced the concept of govnet, which is an IP-based private network. Certainly that bodes well for security purchases, because the goal is to provide a highly secure network for mission-critical government applications. We have seen a couple of other things, such as the State of Pennsylvania issuing new guidelines for security of their core infrastructure and warnings coming from John Ashcroft to company IT managers in terms of bolstering the security of their networks. Clearly, what we’ve learned from September 11 is that one of the goals of the terrorist attacks is to cripple the US financially. And one way they can go about doing that is targeting IT networks. Clearly, the government would like to prevent that from happening. The question is now, does that follow through to the private sector? We haven’t necessarily seen that to date, but overall awareness is improving.

TWST: Olivia, we’ve been talking about recent history. As we look out, what do you see taking place over the next year or two?

Ms. Golden: I think that over the next few quarters we’re not going to see a tremendous amount of change within the Internet infrastructure segment. We probably will not see a lot of buildout for new infrastructure within the private sector, with the exception of building out redundancy within networks and perhaps parsing out what’s considered mission-critical and non-mission-critical. Most likely, we will see companies take aim at securing existing infrastructure. For example, we may see the buildout of new virtual private networks, which is something we haven’t seen a lot of today. We also may see an increase in the use of digital certification that provides strong authentication. And finally, the IDS vendors may see an improved demand environment. That said, we still think we will need to see the macroeconomic environment improve before we begin to see significant increases in IT spending.

TWST: Olivia, what are your favorites in this environment?

Ms. Golden: We like the companies that play within the firewall, VPN, and IDS sectors. One name in particular is SonicWALL (Nasdaq:SNWL), which delivers firewall appliances to small and medium-sized businesses. Another company to keep an eye on is in the antivirus sector, which is Network Associates (Nasdaq:NETA). They’ve streamlined their business and they’re in the process of setting up some non-core businesses that should help them focus more on some of their core antivirus product line as well as the network management sector. In fact, they’re trying to leverage some of their core expertise in network management to enhance their antivirus solutions. The antivirus market is probably one of the few IT segments out there that will see good growth this year. So that’s certainly a stock to keep an eye out for.

This special issue includes:

1) Internet Infrastructure - In an in-depth (9,500 words) Analyst Roundtable, John Corcoran, Internet/Digital New Media Analyst at CIBC World Markets, Steven B. Frankel, Managing Director at Adams, Harkness & Hill, Inc., Olivia Golden, Vice President, Equity Research at Bear, Stearns & Co. and Samuel Wilson, Vice President at Merrill Lynch Global Securities, examine the outlook for the sector including Internet security, consolidation and share specific stock recommendations.

2) Outlook for Internet Infrastructure - In an in-depth (4,800 words) Analyst Interview, Jordan Klein, Associate Director in the technology group at UBS Warburg, examines the outlook for the sector and shares specific stock recommendations.

3) CEO interviews (average 2,500 words). Top management of sixteen sector firms examine the outlook for their firm and the sector.