Some Fancy Footwork Out At The Big Dance
"I do not object to people looking at their watches when I am speaking. But I strongly object when they start shaking them to make sure they are still going." - Lord Birkett
At the granddaddy of all Northwest investment conferences, three crystal-clear themes emerged: Internet, Internet, Internet.
And then, as the day wore on, yet another theme blossomed: Internet.
It hardly mattered what the company was peddling. Somehow, some way, the "I" word dwarfed the Space Needle. A year ago, it was hardly mentioned. Even months ago, it failed to appear in most sentences. Like it or not, online or off, the path through a cable box or television is widening faster than almost anything we've ever seen. Yes, faster even than the proliferation of sports stadia in Seattle. No foolin'.
Putting the cart on the correct side of the horse, this was Ragen MacKenzie's 19th investment conference. The Spanish Ballroom and adjacent meeting rooms at the Olympic Four Seasons Hotel in downtown Seattle were standing-room only as 18 companies strutted their stuff.
Almost two-thirds sent their chief executive officers or presidents, a tremendous benefit for investors and a tribute to the pull of the Ragen MacKenzie brokerage, now under the able care of Chairman and, yes, Chief Executive Lesa Sroufe.
For the first time here, the event was compressed to a single day. That's sad because of the dashed exposure to other companies. But the hosts realize brain drain heavily influences everything after the first day, making the exorbitant cost to mount such a venture less justifiable.
Wall Street Recap caught 10 of the 18 performances. Without further adieu, the ratings:
Starbucks: Let's see, what did CEO Howard Schultz do right? He did not use notes or a printed script. He looked at his audience all of the time. He showed no slides. He played no videos.
And he brought down the house. No only did he respond to his critics, he responded before they spoke. Starbucks has been criticized by Wall Street because some pinheads in New York say you can't go anywhere without tripping over one of Schultz's stores.
"I'm here to tell you this is a new dawn for our company," the impassioned Schultz said, and you could almost hear the audience nod. "We are in the infant stages of building a global brand. . . . This is our moment."
Then, in a line that spectators were heard to repeat throughout the day, Schultz said:
"The Internet is the death of distance." The death of distance - why didn't yours truly write that?
Without elaboration, Schultz said Starbucks' Internet plan will be unveiled in the next 90 days.
You could get emotional just recalling his zeal. If the company does half as well, Starbucks' name will live forever. By the way, Schultz spoke in the morning. The stock hit an all-time high, up more than $4.50, that day. Hmmm.
Grade: A+, never more readily granted.
Washington Mutual: Two senior execs, Doug Wisdorf and Craig Davis, shared the presentation, absent the two top dogs (although one of them lurked in the audience).
The presentation was competent, but it is nearly impossible to get the highest grades without the CEO on hand. In answer to the "I" theme, WaMu said home loans will be online in the third quarter.
Best factoid: Free automated-teller service for nonbank customers raises fee income from those customers' banks and also helps attract new customers.
Grade: B.
Boeing: Alan Mulally was at the podium, so both readers know this outcome before the end. The head of Boeing Commercial Airplanes gave his usual, pleasant, comfortable, warm presentation, like sitting around the living room listening to your highly successful and favorite uncle chat about business.
One line: In showing the latest-quarter profit, Mulally said, "It's so nice to stand up here with numbers without brackets around them."
And videos don't have to be an impediment: The four-minute construction of a Boeing 777 was a joy.
Grade: A.
Costco: Chief Financial Officer Richard Galanti is an expert at this stuff, and he proved it. This chain of warehouses selling discount retail goods is on a path similar to Starbucks'.
Naysayers said a discount chain eventually would become straight retail, that it couldn't sell fresh meat and fruit, that it couldn't charge extra membership fees, that it couldn't sell pharmaceuticals or opticals or develop film in an hour, all at advantageous prices, and all without a public-relations department.
But Costco has. It even sells diamonds with a guarantee the buyer can get an appraisal at twice the price.
A Galanti moment: The silliness of selling a $48,000 diamond with a $6 shipping fee. Another: When "The Lion King" debuted on video, 3 percent to 5 percent of the nation's distribution went through Costco.
Grade: A-. (Not a bad second to CEO Jim Sinegal.)
Nordstrom: Co-President William Nordstrom was wedded a little too much to his script, but it was easy to imagine him five, 10, 15 years from now delivering his remarks as relaxed as a Schultz or Mulally.
Nordstrom's Internet position mirrored Costco's: Go easy, do it right. "We don't subscribe to the view that all malls will be replaced by the Internet," the youthful Nordstrom said.
Grade: B+.
Immunex: With Enbrel in headlines the past year, it is easy to forget this pharmaceutical producer has other potentially blockbuster drugs in the works. CEO Ed Fritzky helped remind the audience of treatments possibly coming for asthma, multiple sclerosis and AIDS.
In his five years at Immunex, Fritzky has proved to be the perfect person to transform the company from R&D to commercial products.
"The company has made progress . . . but not as much as we'd like for the future," Fritzky said.
Grade: A-.
GST Telecom: The Vancouver, Wash., company sent CFO Dan Trampush. His knowledge of the jargon of the complex telecommunications industry must have left a few listeners boggled. But overall, he gave a good accounting of GST's business.
Grade: B-.
Airborne Freight: On the day this outstanding delivery service announced disappointing results, Chairman Bob Cline, one of the greats, opted to send a substitute, his CFO, Roy Liljebeck.
Liljebeck seemed perplexed at lower growth in shipments and was uncertain whether that indicated a slower economy in general: "I wish I knew what the trend was. We can't see we're doing anything wrong."
Grade: B.
Cavanaughs Hospitality: Donald Barbieri, CEO of the Spokane chain, could sell a new ballpark to Seattle. Talk about gung-ho.
Best line: "What's glamour in Pocatello? There is no glamour in Pocatello. That's why we're glad we're there - we don't need glamour."
Grade: A-.
Microsoft: CFO Greg Maffei, also a Ragen MacKenzie board member, declined comment on the two most interesting issues, the U.S. monopoly case against Microsoft and whether Maffei will split. Word around the Olympic was Maffei was miffed - who wouldn't be? - that CEO Bill Gates squelched Maffei's bid to run another company partially owned by Microsoft.
One stat: America will wait 2 billion hours on the Internet this year.
Another: The No. 1 computer sales spot in Germany is grocery stores.
Despite Microsoft's big online presence, "we are still challenged to find a profitable Internet business."
And, yes, the rest of the year will reflect "a lot tougher time" for Microsoft profits. Maffei is the consummate pro at lowering expectations.
Grade: A- (Not bad, considering he ignored the two biggies.)
Stocks and bonds
The Dow Jones industrial average of 30 blue-chip stocks last week rose 99.37 points to 10,789.04.
The WM Group Northwest 50, 50 stocks weighted by their regional economic impact, fell 208.50 points to 7,454.27.
The U.S. Treasury's 30-year bond was up $10 entering Friday's trading, but dropped to a weekly loss of $10 per $1,000 of face value, closing at $940. That was priced to yield 5.66 percent, said Pamela Warren, Everen Securities senior vice president.
Warren said a strong Gross Domestic Product report, much better than expected, and a strong Chicago Purchasing Managers' report caused bondholders to fear inflation, bonds' No. 1 enemy. Inflation fosters higher interest rates, deflating the value of bonds already in investors hands. The National Association of Purchasing Managers' report is due out tomorrow.
Municipal bonds also were higher before Friday, then wound up unchanged, reported Judith Cochrane, Seafirst Bank Municipal trader. That left the Seafirst Northwest Municipal Bond index at 5.06 percent.
Individual investors were big players last week, Cochrane said, active in both short- and long-term maturities. She said data Thursday showing no worries about inflation conflicted with the GDP report, causing her to wonder whether the glass is half full or half empty.
Wall Street Recap appears Sunday in the Business section of The Seattle Times. Greg Heberlein's phone message number is 206-464-2267. His e-mail address is: gheberlein@seatimes.com ------------------------------- Readers portfolio 10 NW stocks preferred by readers
%CHANGE STOCK SINCE 1/99 . -------------------------------------- Alaska Air -0.4 . Amazon.com +60.7 . Boeing +24.5 . Costco +12.1 . Icos +33.6 . Micron Technology -26.6 . Microsoft +17.3 . Starbucks +31.6 . Visio -26.2 . Washington Mutual +7.2 .
Average: +13.4%.
What $1,000 invested in those stocks would be today: $1,134.
Reader's non-portfolio 10 NW stocks picked randomly
%CHANGE STOCK SINCE 1/99 . ----------------------------------- Avista -22.1 . Horizon Financial -4.0 . Micron Technology -26.6 . Penford -18.4 . Precision Castparts -3.4 . Puget Sound Energy -11.9 . Pyramid Breweries +25.0 . SeaMed -1.7 . Summit Design -63.4 . Westower -12.3 .
Average: -13.9%.
What $1,000 invested in those stocks would be today: $861.