Investors bet big on nanotech, VoIP

Posted: Friday, January 09, 2004

NEW YORK (AP) Investors are once again jumping into stocks they think will be linked to the next big thing.

The rage on Wall Street right now is for anything with ties to nanotechnology and Voice over Internet Protocol. Even though many of these companies aren't profitable and they have little proven track record, big money is pouring into their shares.

Investors' exuberance is just like it was with biotech shares in the 1980s and Internet stocks a few years back.

Remember, those bets didn't leave many investors much to show in the end.

Of course, investing is a risky proposition, no matter where you put your money. But it becomes even more dangerous when you venture into such speculative shares.

Witness the recent boom in nanotech stocks, which have been strong all year but got a big jolt after President Bush signed a bill in early December to invest nearly $3.7 billion for work in the field.

Nanotechnology usually defined as the creation and manipulation of materials no larger than a billionth of a meter, or 1/100,000th the diameter of a hair has the potential to transform everything from fabrics to health care to computers.

Corporate labs are investing heavily in this technology, universities have set up research institutes across the country and there are hundreds of startups playing the field.

Among the nanotech-focused public companies, Altair Nanotechnologies is up more than 500 percent over the last year, while Nanophase Technologies has more than tripled. Even a publicly traded venture capital firm that funds nanotech startups has been gaining. Harris & Harris Group is more than four times higher than it was last January.

But only one of this bunch, NVE, is actually profitable. It has soared from around $9 to over $54 this year.

And exemplifying investors' craze for anything nano-related, consider the case of Nanometrics. Its stock shot up 10 percent one day last month and had a trading volume of 1.6 million shares, its highest in three months. But here's the catch the company didn't announce any market-moving news that day.

Instead, it seems that Nanometrics, which trades under the ticker symbol NANO, was riding the nanotech wave even though it's not in that business. It makes tools that measure the thin films used in semiconductors, flat-panel displays and disk drives.

It benefited from an announcement by another company, Nanogen, which said it had received a nanotechnology patent.

We've seen that happen before. During the Internet boom, all it took was a dot-com in a name regardless of what business it was in to fuel a spike in many shares.

Also on a winning streak are VoIP-related shares. These had started to build in popularity during the last bull run, but then tumbled along with the telecom meltdown during the bear market. Now, the appetite for these stocks is soaring as more businesses and consumers look to connect their telephones to an Internet-based service.

Just look at the surge in communications provider 8x8. It is losing money and sales are falling, but you wouldn't know it by the stock price. It has rocketed higher over the last year, climbing from about 22 cents a share to well over $4.

Theglobe.com is also sharply higher this year, largely thanks to its voiceglo subsidiary. It's a second go-round for the one-time Internet darling that had one of the best performing initial public offerings in history but then tumbled to pennies. Theglobe.com's stock has gone from being nearly worthless to trading at more than $1.40 a share this year.

The trouble is, they're up against the major communications companies including Time Warner Inc.'s cable TV unit, Qwest Communications International Inc. and AT&T Corp. which recently announced plans to sell VoIP services to consumers.

It's too early to tell where this will leave buyers. Getting in early could mean they walk away with big profits either through price appreciation or a buyout from a rival or they could end up with only losses to show.

Rachel Beck is the national business columnist for The Associated Press. Write to her at rbeck(at)ap.org



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