E-Mailbag Monday: FreeMarkets, Ashford.com, Organic Growth
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What's your opinion of FreeMarkets?
Reply: Typically, in December the IPO market cools down, as people go on vacations and drink egg nog and such. However, there seems to be no stopping the IPO market.
FreeMarkets is one of the companies that should be spectacular. It is a business-to-business company (need I say more?), which specializes in developing sophisticated auction technology. The technology is flexible enough to deal with many industries as well as qualitative factors (such as nonprice components, currency translations and so on).
In 1998, FreeMarkets handled auctions for about $1 billion in purchase orders. As for the first six months of 1999, the amount was $630 million. Customers include General Motors, Quaker Oats and Allied Signal.
Ashford.com: Still Sparkling
I recently purchased Ashford.com at 13.875 on 11/23/99, because of your article. Today, when I pulled it up, it had hit 35. Because it is a first in its market, do we have any idea where it will go? Curious on when I should get out.
Any insight would be great!
True, as with any new company, there have been glitches. This week, the Web site had a major error. Basically, you could have purchased a Gucci watch for free. It was a model 720L (of course, with a gold case and there was free shipping).
The fact remains that the company is the leader in the luxury e-commerce space, which should benefit greatly this Christmas. In fact, Amazon.com (AMZN) bought 16.6 percent of the company for $11 million. No, this was not a pricing error either, as Amazon.com definitely has much clout. However, the deal calls for Ashford.com to sell its high-end items to the masses of Amazon.com.
What does the phrase "organic growth" mean?
Reply: This is a common buzz word in finance. In essence, this is the growth in sales that occurs from existing operations. So, the sales that result from, say, mergers and acquisitions are not part of organic growth. If much of a company's growth is not organic, then this could be a danger sign. It may indicate that the core business is not very strong.
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