Murphy's Technology Expertise...

12/19/2003 12:00 am EST


Michael Murphy

Former Editor, New World Investor

In a "flash bulletin" sent to readers of his Technology Investing newsletter, tech expert Michael Murphy says, "The fundamentals for 2004 look great across the board, especially in technology. It is time to get fully invested. In order to take advantage of this upswing, I want you to buy these three tech stocks."

"Corvis (CORV NASDAQ) is the leading supplier of all-optical networks, a business that has been down the tubes since the tech recession began as most of their customers stopped spending and/or went broke. The company took advantage of the downturn by buying one of their customers, the long-distance data unit of Cincinnati Bell, at distressed prices and becoming a fiberoptic network operator. Corvis has no debt. Management is targeting profitability in mid-2004, and I think they can meet this. There is, however, one potential bump in the road ahead. There's an ongoing investigation of suppliers to Quest regarding stock allocations on its IPO. Though Corvis was a supplier to Quest, I expect this to be settled with low or no significant impact. Buy CORV under $1.80 for a $3 target by the end of March.

"Evolving Systems (EVOL NASDAQ) was a recent trade that netted us 24%. This is the company that has the software to implement wireless number portability. The stock got as high as $19.27 a little over a week ago, then plunged when word went around that AT&T Wireless is having difficulty implementing number portability. They are an EVOL customer. However, the problem is not in EVOL's software, it seems to be in verifying the switched numbers, done by a private company named Neustar. AT&T Wireless is the only carrier using Neustar. EVOL got as low as $10.87 a couple of days ago and bounced nicely once the misunderstanding was cleared up. Buy under $15; I think there's a quick trade back to $18+ in a Santa Claus rally.

"SpatiaLight (HDTV NASDAQ) makes high resolution, miniature reflective liquid-crystal-on-silicon displays. Three of these go into flat computer monitors, video projectors, high definition television sets and wireless devices. They just started commercial shipments in the September quarter, and they have three major Chinese TV and computer monitor manufacturers as customers. LCD TVs have a crisper, brighter picture than plasma displays. The company isn't profitable yet, and Wall Street coverage is limited. Also, there's been some insider selling recently and the stock just backed off of its 52-week high. Buy HDTV under $6, and I think we'll see $8 or $9 on the next upswing into March."

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