Upstarts close in on the monoliths of Wall Street

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WITH the surge this past week in the performance of technology and smaller 'over-the-counter' stocks, Wall Street is witnessing an important changing of the guard, market analysts said yesterday, writes Larry Black.

In the most dramatic evidence yet of the shift in the computer business away from the monolithic International Business Machines, two relative upstarts - Microsoft and Intel - are both closing in on IBM's once unassailable market valuation. Despite some profit-taking and contrary activity yesterday, Microsoft is expected to top IBM's dollars 28bn market value in the next few weeks, and Intel will probably match it before the year is out, industry analysts say.

Both Intel, the world's leading semi-conductor manufacturer, and Microsoft, which makes 90 per cent of all computer operating systems, reported 30 per cent increases in quarterly profits this week, while IBM - expected to lose dollars 3bn for 1992 - saw its credit rating lowered an exceptional three levels, from top- rated Triple A to Double A Minus.

IBM's more traditional computer hardware rival, Apple, also posted record sales for the past quarter, but saw profits fall slightly because of increased competition for computer hardware, John Sculley, chief executive, said.

At the same time, the New York Stock Exchange, the once-dominant market where IBM and other Dow Jones Industrial shares are listed, is being overtaken by Nasdaq, the electronic market once for small-capitalisation companies that is now the home of Microsoft and Intel, as well as other IBM rivals like Apple Computer and Novell.

While the 30-stock Dow Jones average languished well below its 1992 highs of above 3,300, and with even the broader Standard & Poors 500 index rising only marginally, the Nasdaq composite hit a new record this week at 695.70, up more than 20 per cent since the technology rally began last autumn.

The NYSE's weaker performance reflects problems in many big US firms, from IBM to General Motors to Citicorp. The boom on the Nasdaq, on the other hand, is due almost exclusively to the relative strength of bold new service firms, in information and bio-technology.

Microsoft's founder, Bill Gates, was already America's richest man in 1992, with a personal fortune of more than dollars 7bn, and the company's share price has risen some 25 per cent since Forbes magazine's last accounting.

(Photographs omitted)

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