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Subject:  Gorilla Game: Viable now??? Date:  3/3/2000  3:49 AM
Author:  OnAJungleHunt Number:  1297 of 8806

The "Gorilla Game" is a fantastic book, and has a tremendous amount to teach about the Technology Adoption Life Cycle and how to pick out the tech stocks that will really have both large and sustainable competitive advantage. And the "Ten Rules" proposed sound so compelling. How could one NOT make terrific money this way??

Well, one POSSIBLE problem MAY be the enormous valuations of most promising tech stocks today. One of the premises of the book is that early in the hypergrowth phase, that the market will underestimate the future value of an emerging gorilla. But this has become very rare in today's market. Travelling back to 1990, when Cisco,arguably the best Gorilla of all, was coming on scene, it traded at a price:sales ratio of approximately seven and a price:earnings ration in the neighborhood of 30. It's market cap was a "mere" half-billion. And I'm sure at that time many thought that was an awfully risky valuation for this new upstart.
...high tech being risky and all. And if we'd of read the "Gorilla Game" back then and applied its principles, well, we wouldn't be wasting our time on this board, being multimillionaires.

But today, it seems that as soon as a tech company comes along with even the promise of possibly, some day "making it big", it already has an enormous p:s ratio (the p:e ratios are so absurd, no one even uses them any more) and an equally enormous market cap. There now is a conflict for a pure gorilla gamer. If one waits, as the book suggests, until a market is defitely in the tornado (or in the bowling alley for software applications) so as to avoid being left to die in the chasm, by then the price of the company is (often)way over-valued, at least if we use the histories of previous gorillas like Cisco, Microsoft, etc. (If you don't believe me, go look at the valuations early on for gorillas like those mentioned...and some great royalty game stars like EMC and Dell...and compare them to the likes of JDSU, PALM, or ARBA at comparable points in the Technology Adoption Life Cycle). This isn't to say that one may still not make SOME profit in these stocks, but the odds of coming even close to earlier gorilla returns seems remote. Now one can try to get in earlier so as to get a more attractive price, and maybe have a better chance at making a killing like early Cisco shareholders did. Then again, you could very well pick wrong, and lose a bundle if your stock either doesn't become the gorilla (the valuations are so high, that buying a "basket" of these stocks becomes even riskier), or worse yet,fails to make it across the chasm.

Now, I don't think all tech stocks are in this situation. But probably the majority are. And so one needs to look that much harder, and worthwhile gorilla games are becoming that much rarer.

Well, got to go...thinking about picking up some PALM at a P:E ratio of 1400...I know that's a high ratio, but this COULD become a gorilla some day, after all. And the P:S ratio is ONLY 68. And if we start talking about the price:vision ratio, it's a steal!!
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