This article is from the September 1, 2001, issue of Red Herring magazine.

Now that we can see the midway point of 2001 in our rearview mirror, we can't help but wonder what it will take to get the market moving again -- in any direction. The summer has been mind-numbingly uneventful. The Dow Jones Industrial Average, S&P 500, and Nasdaq barely budged in the three weeks ending August 3, as each fell less than 1 percent. The situation wasn't much different with the Red Herring portfolio, which increased a scant .8 percent in the lazy days of late July. Investors seem content to sit on the sidelines for the time being. Following their lead, we've decided that we are too. We aren't making any changes to the portfolio.

Clearly, though, not every one of our portfolio companies has been on vacation. Two of our core holdings -- Nokia (NYSE: NOK) and Cisco Systems (Nasdaq: CSCO) -- were active enough to give our portfolio enough juice to squeak out its meager gain. Nokia was the portfolio's biggest gainer, as its shares surged 21.3 percent in the three weeks ending August 3. The cell phone maker's second-quarter earnings surpassed analysts' lowered expectations (Nokia issued an earnings warning in June), but more importantly, Nokia CEO Jorma Ollila gave an upbeat outlook for the end of the year and 2002 on the company's conference call. In addition, Nokia announced that it was acquiring privately held Amber Networks, a developer of edge routers, for $421 million in stock.

Cisco also opened up its purse strings, announcing its second acquisition in less than a month. The company followed up its early July purchase of AuroraNetics with a deal on July 27 for Allegro Systems, which develops technology for virtual private networks. Cisco shelled out $181 million in stock for the privately held Allegro; its stock gained 7 percent. Still, woeful economic conditions continue to hurt Cisco, which reported on August 7 that its fiscal fourth-quarter earnings plummeted 86 percent from a year ago. What's more, CEO John Chambers warned that sales in fiscal first-quarter 2002 may drop as much as 5 percent from fiscal fourth-quarter levels.

CABLE SMACKDOWN Merger news -- or at least the speculation thereof -- was a factor with two of our holdings. Cable giant Comcast (Nasdaq: CMCSK), which first disclosed its interest in acquiring the broadband assets of AT&T (NYSE: T) on July 8 for $44.5 billion in stock, appears to have an uphill battle in its quest to take the market-share lead in the cable business. Rumors continue to circulate about a combination of AT&T's and AOL Time Warner's (NYSE: AOL) cable assets.

Regardless of what happens with AT&T, we are still big fans of Comcast. The company reported a stellar second quarter: cash flow increased 16 percent over the same period a year ago and revenue was up 20 percent. Comcast also raised its year-end estimates for digital cable and high-speed data subscribers, a further sign of the cable company's strength. The company's shares eked out a tiny gain, rising .7 percent. AOL Time Warner's stock fell 5.8 percent, although the company had more on its plate than just the cable talks: AOL announced a $100 million investment in Amazon.com (Nasdaq: AMZN) and also agreed to buy the IPC Group, a British magazine publisher, for $1.6 billion.

In other developments, EMC (NYSE: EMC) continued to disappoint, falling 7.4 percent after the storage leader reported disappointing second-quarter earnings. Shares of Oracle (Nasdaq: ORCL) slipped 7.9 percent as investors worried about what impact strong results from competitors PeopleSoft (Nasdaq: PSFT) and SAP (NYSE: SAP) would have on the company.

Finally, we once again have sad news to report about a recent portfolio addition. Despite the fact that content-management software company IntraNet Solutions (Nasdaq: INRS) reported a year-over-year earnings gain of 22 percent in its fiscal first quarter, its shares plunged 18.5 percent following an analyst downgrade. Will we never be set free?

Looking at the remaining portfolio holdings, Atmel (Nasdaq: ATML) inched up .3 percent. Shares of Electronic Data Systems (NYSE: EDS) slipped .6 percent. Immunex's (Nasdaq: IMNX) shares fell 4.2 percent. Shares of Integrated Circuit Systems (Nasdaq: ICST) surged 15.7 percent. And Peregrine Systems (Nasdaq: PRGN) eked out a .6 percent gain. The overall value of the portfolio as of August 3 was $1.76 million, 76 percent higher than its initial value.