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Enron: A Very Big Internet Company

This week, Enron announced its earnings. And they were tremendous. Net income increased 30 percent to $289 million and revenues soared 75 percent to $16.9 billion. Weren't only Internet companies supposed to grow like this?

True, Enron is in some big but sleepy businesses, such as natural gas and electricity. However, Enron is quickly becoming an Internet company. Management understood there were tremendous benefits to be gained from going digital. The result has been EnronOnline. It is a Web-based transaction system that allows customers to buy and sell the energy-related products of Enron. These products include traditional things, such as crude oil and gas, as well as exotic products, like emission allowances and weather derivatives. There are even plans to sell airport runway rights.

How does a big company do such things? Aren't they supposed to be unseated by disruptive technologies? Actually, Enron has a very open culture. For example, there was no need for CEO approval for EnronOnline.

Currently, EnronOnline accounts for about 60 percent of Enrons wholesale transactions. The online system has more than 800 products and has conducted about $100 billion in transactions since it was launched in November 1999.

But Enron has also ventured into another line of business: broadband. This is the result of a joint venture with Sun Microsystems. Enron has also partnered with SBC, Verizon, Qwest, Covad, Telus, and ReFlex. In the past quarter, the Enron Broadband division had $151 million in revenues and an $8 million loss.

Expect lots of growth from this division. Recently, the company struck deal with Blockbuster (BBI). It is a 20-year exclusive contract to deliver movie-on-demand services. The in-home entertainment business is expected to be substantial, with about $20 billion per year.

Given all this, it is no surprise that Fortune magazine has named Enron the "Most Innovative Company" for the past five years. In a way, Enron is like Cisco. Cisco has created incredible shareholder wealth by making the Web an integral part of the company. This is what Enron is doing, and the results have been almost instantaneous.