Net Stock Remedy
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Henry Blodget's name is just as notorious in American households as it is on Wall Street. We're talking about an individual who has the power to move Internet stocks and the broader markets with a gasp of breath or the stroke of a pen. This has been true since his prophetic $400 Amazon.com (AMZN) price call in 1998 while at CIBC Oppenheimer, which was surpassed in only a few weeks. Since that time, Blodget has become the Senior Internet Analyst at Merrill Lynch and a fighting bull behind such stocks as America Online (AOL), Infospace (INSP), and Internet Capital Group (ICGE).
Many industry insiders and investors are skeptical of Blodget's bullishness and mass impact on the markets. After all, it's his job to pump up and support the stocks for which Merrill Lynch does underwriting work. However, Blodget is the first person to tell you that "all trees will not grow to the sky."
In fact, though Blodget has said, "We continue to believe there is long-term upside for the leading Internet stocks," he also added, "we also continue to believe that the market is transitioning into a more mature phase of growth and that this transition, combined with a massive increase in competition across all Internet sectors, will cause a shakeout and consolidation. Seventy-five percent of the current crop of 400 or so public Internet companies will never make money and will disappear within five years, either through consolidation or failure."
We had the opportunity to visit Henry in his New York City office for an exclusive Reporter@Large interview.
Blodget: You know Luke, 100 miles a minute, but very exciting.
Reporter@Large: You recently came out with a pretty bullish report along with Jessica Reif Cohen (Merrill's Senior Media Analyst) regarding the AOL-Time Warner merger. What is so attractive for investors and why the jump in price after your report?
Blodget: Well, the stock had pulled back a lot. We think this is a very powerful company that is now positioned to benefit from the impact of the Internet on the media and communications industries over the next ten years. Usually when you have earth shaking change like you have now in all of these different sectors, a good way to invest around it is to own the companies that are well positioned. What I mean by that is that at this point in time, we think it's beneficial for AOL and Time Warner to own both sides of the converging Internet and media. If you own both cable and the interface, you're better positioned to drive broadband cable. If you own the cable box, the subscriber, and the interface, you're better positioned to drive interactive television. If you own both music content and the interface, you're in a better position to drive music downloading. We feel that if any companies can make a merger like this work, these are the ones that can.
Reporter@Large: How big of a step was this for AOL's cable pipe mission (access to cable pipes)?
Blodget: AOL had already pieced together a pretty good broadband solution on every other platform. It's clear though, that cable is the best platform. AOL was already accesses over cable on @Home and on Road Runner as people get those services and then access AOL through them. This will obviously make it a lot easier for people to get AOL over cable. Ultimately, we believe people will be accessing the Internet over multiple dev