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Beyond.com: Beyond Repair?

Beyond.com was an Internet pioneer, starting in 1994. Unfortunately, like most other e-tailing stocks, Beyond.com has seen its stock price plunge.

Interestingly enough, there was much concern that Beyond.com would be delisted from Nasdaq. But the company was able to re-gain compliance and will remain on the exchange.

In the second quarter of 2000, revenues were $30.7 million, which was only a 17 percent increase from the same period a year ago. Although, during this time, the company was able to reduce its operating expenses by 44 percent.

But the company is in transition. No longer is the company focused on being an e-tailer of software solutions. Rather, Beyond.com has two priorities: developing transactional systems for other companies (known as eStore) and providing downloadable software solutions to government agencies. For example, the sales of the government division were up 207 percent from last year. As for the eStore Group, it saw a 75% increase.

Cash? Well, it is okay. Beyond.com has $42.6 million in the bank. But this is likely not to be enough. In fact, the CEO has indicated he is seeking financing options.

Currently, the company is expected to reach breakeven by the fourth quarter of 2002. Obviously, this is not acceptable to shareholders. So, in the fourth quarter, Beyond.com will provide a revised target for breakeven.

Beyond.com has a new CEO: Ronald Smith. He has 34 years experience in the software and hardware industries. Formerly, he was the president of Merisel, North American Distribution.

So far, he has been making the right moves. Actually, the stock has been showing some strength lately. But, it will take some time for the company to make a turnaround.

In other words, the risk is still very high. But perhaps a way to play the company is to purchase its convertible subordinated notes. This is a debt instrument, which has a coupon rate of 10-7/8%. The note is due in December 1, 2003. What's more, you get the upside of the stock if it does turnaround.