E-Mailbag Monday: IPO of the Week, Yahoo! & eBay, B2B Supply Exchanges
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What's the IPO for the week?
Reply: One of the hottest sectors for IPOs has been infrastructure. While the Web is getting faster, there is still much work to be done. One company providing solutions is ArrowPoint Communications.
The company does "content switching." In other words, it helps companies improve the speed, reliability and security of Web sites. The solution involves hardware switches and sophisticated software. To gear-up for the Christmas season, Toysmart.com ordered two ArrowPoint Switches. The performance of the site was doubled -- without using extra servers.
ArrowPoint has over 100 customers. Examples include Ragingbull.com, Exodus and NaviSite. Revenues were $200,000 in 1998 and zoomed to $12.3 million in 1999.
Yahoo! & eBay: A Marriage Made in Cyber Heaven?
What do you think of the possibility of a merger between Yahoo! and eBay?
Reply: Rumors have been swirling for some time. And this makes sense. Yahoo!, despite its incredible user base, is having problems penetrating the person-to-person auction market. Yet, this is a tremendous market, which should grow for many years.
However, as with any deal, the question is really about price. eBay currently has a market capitalization of $31 billion. In order for Yahoo! to purchase eBay, there will need to be a premium, probably at least 30 percent. True, Yahoo! has a hefty market capitalization -- $102 billion -- the fact remains that the price tag would be enormous. It is likely that the market would penalize the stock of Yahoo!
Then again, the portal market is extremely competitive. The AOL-Time Warner merger is definitely a major threat to Yahoo! A merger between Yahoo! and eBay would likely be a way to fight off AOL. It would be an online advertising and e-commerce powerhouse.
New Buzz Word
What are B2B supply exchanges?
Reply: Of course, the B2B market has been red hot. B2B allows companies to transact with each other -- creating revenue opportunities, as well as lower costs.
To take advantage of the opportunities, traditional companies are creating alliances with competitors to create B2B supply exchanges. One recent exchange was between Oracle, Chevron and Wal-Mart. The goal is to consolidate the convenience store industry. It is called the RetailersMarketXchange.com. The supply market for the convenience industry is about $200 billion per year.
In fact, Oracle has been aggressive in using its technology as the basis of these exchanges, by not only getting development fees but also ownership in the exchanges. For example, Oracle is also part of a retail store supply exchange and an auto supply exchange, which involves GM, Ford DaimlerChrysler.
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