Back in September 2001, I attended an investment conference looking at the new economy. Times were tough of course, but there were many speakers who were keeping the faith that had been born in and encouraged right through the 1990s.
The conference, however, came to an abrupt end when in the afternoon (SA time) it was announced that two aeroplanes flew into New York`s World Trade Centre.
While not wishing to trivialise all of the other consequences of that latter event, one effect was to finally kill off all of the "irrational exuberance" of those times that was attached to ICT. The last wave, as it were, to wash the storm survivors off the raft.
Well it`s been four years and amazingly, we all seem to have survived. Some of us are a little lighter in our investment portfolios, mind you, but in fairly rude health nonetheless. If our tech portfolios are not looking as flash as they were back in early 2000, we can console ourselves with the fact that our homes are worth a lot more, and the rand is still strong.
All things considered, the ICT scene has survived the turmoil, and emerged the better for the experience. All those wonderful things predicted in the 1990s are happening. Cellphones do wonderful things, I can buy lots of stuff online, including music, hotspots are everywhere, and so on and so on.
There is some downside of course. The regulatory scene still moves at the speed of a glacier, and as a result, the severe lack of bandwidth - an issue raised at that same conference I mentioned above back in 2001 - is still a major hindrance to business in SA.
For watchers of ICT stocks, 2005 was an interesting year. The sector seems to be catching the waves that lifted other sectors recently, such as property and retail. Corporate financiers have been licking their lips, with loads of deals in the air.
Biggest of these was the intention of Telkom to acquire Business Connexion and we have seen Vodafone upping its stake in Vodacom through Venfin. We have also seen the plans to de-list FrontRange, and the market rumourmongers drove up the price of MTN on the speculation that an international telco might be after it.
Everyone`s in play
Yes folks, it`s a deal-makers market, and if you have the stomach for it, a good market for speculators to make a killing on prospective deals. Everyone is in play.
All things considered, the ICT scene has survived the turmoil, and emerged the better for the experience.
Patrick Lawlor, contributor, ITWeb
The year 2006 should see more of the same. This is a good market for tech stocks, but long term investors will trust those entities with scale and size over those with potential. Expect to see a lot of takeovers of small listed integrators, either by the big houses, by private equity funds or managers, or a mix of all of these. For the sharp punters, the money is in betting on companies being taken over at a decent premium. For the long-term investors, the established, big ICT firms should offer solid growth for a while yet.
New listings there will be, but investors are more discerning these days than they were in the late 1990s. Listing requirements are also tougher, so we should be spared the dross of the previous era.
In other words, 2006 will be good for tech stocks, but consolidation will still be the key. This may sound incongruous, but it has happened in many a sector before: there used to be dozens of gold mining shares listed on the JSE in the early 1990s - now there is just a handful.
Tech investors who were around back then, should be a wiser bunch, and should be able to apply their experience in new markets. Dotcoms were not the last bubble we have seen - the property sector is showing many of the same scary signs of growing way beyond its fundamental value.
It would be most unfortunate if those, who were burnt in the tech crash, were now the ones to gear themselves to the hilt by speculating on property. This is one year where betting on ICT may well be the wise choice.
* Patrick Lawlor is a former ITWeb writer and Brainstorm editor.
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