FINANCIAL FOCUS: TECHNOLOGY EVOLUTION LEADS TO INVESTMENT OPPORTUNITY

This "Financial Focus" column is prepared by Edward Jones Investments, headquartered in St. Louis. Jones includes branches throughout the nation, including Cape Girardeau and Jackson.

These days, it seems everyone is talking about investing in high-flying technology and Internet stocks. The spectacular price run-ups of these companies has, not surprisingly, spurred tremendous interest on the part of investors.

What are the implications for this groundswell of demand? In the short term, many investors may be left holding the "cyber-bag." In fact, several big Internet providers have issued disappointing earnings reports for 1999, and many companies are already trading at prices well below their highs.

This isn't to say that some Internet companies will not thrive in the long run. In all likelihood, there will be a shakeout of these types of firms, and the survivors will come to dominate the market. If you had a crystal ball, you could do pretty well by putting your money into these companies.

Short of that, however, what makes sense for an investor who's interested in participating in "hot" technologies, but who doesn't want to get burned?

To begin with, briefly consider the evolution of technology in the past few decades. Over the past 30 years, we've moved from the mainframes to minicomputers to personal computers. During this time, the technology industry has been driven by the need for more computational power. And this power has increased tremendously -- today's personal computers have more processing power than the old mainframes that filled up an entire room.

Now, however, the industry is entering a new phase in which the need for increased computational power is becoming secondary to the need for computer-based access to communications channels. For example, people now send 10 times as much e-mail as they do regular mail, and personal computer users increasingly rely on the World Wide Web for various forms of commerce. Consequently, Internet traffic is doubling every 100 days.

At the same time that Internet use is growing rapidly, we are also experiencing worldwide deregulation of the telecommunications industry, leading to increased global competition and falling prices for communications services.

The result? More and more people with cheaper and easier access to cyberspace, and just as regular highways can become congested, so too can the "information superhighway." If you've ever had to wait to get on the Internet or browse the Web, then you're familiar with the bottlenecks that can result from insufficient "bandwidth" -- the information-carrying capacity of a communications network.

These capacity shortages are frustrating to Internet users -- but they represent big opportunities for companies that can provide solutions to increase bandwidth. These are the companies that may represent attractive investment opportunities in the technology sector. Once bandwidth is expanded, other companies should also benefit, including some that provide content for the Internet or produce communications components and services.

When it comes to investing, many people try to "catch a wave." That's no easy feat -- but if you keep bandwidth and communications in mind over the next few years, you'll at least be swimming with the tide.

The Southeast Missourian does not recommend that readers buy or sell stocks featured in this column, which is provided for informational purposes only.