eMailbag: Lucent, Infoseek, Microsoft, Netscape, & More
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First reader up this week writes about the ability of your electric utility company to also provide Internet access via those same jolted lines:
"Northern Telecom, the #2 digital switch vendor behind Lucent, already has this technology. They've also demonstrated it at a school in the UK. The PC-based NICs have been around for years. I wouldn't write it off too quickly."
Reply: It's a long way from a school demo to Main Street USA. We're all for multiple access, though, since it helps give the end-user a choice. Choice means better price, better price means more users. But if the telcos lack basic clues about access, then how much more so do the utility firms?
From our observations, monopolies have difficulty being entrepreneurs. AT&T (NYSE:T) had to spin off Lucent (NYSE:LU) because it was lost in the Ma Bell mothership. Lucent has more Internet gadgets than IBM, but who's counting?
"Couldn't agree more on your perspective re: Infoseek (NASDAQ:SEEK) [ISR, January 16]. Where is the company's PR person? There is value in good will of any sort, and Infoseek's sitting on a pile of it.
"The infancy of this industry and the lack of marketing savvy of many, from Gates down, is astounding. But the dollars are coming soon to a stock portfolio near you . . .!"
Reply: RelevantKnowledge's numbers--if they are correct--show Infoseek at 6.8 million users for December. That's significant in our book since aggregating that many users is not easy in the Web space, especially as more and more Web sites come on board. But our theory is that the Web sites that have traffic today may likely be the ones that grow traffic tomorrow as they become infohubs, networks unto themselves.
It's the name part that's partly off kilter perhaps. People forget that Excite (NASDAQ:XCIT) began life as "Architext" as the official company name. Maybe Infoseek should rename the media side of itself? Keep the Infoseek as the software side. Boil it down and the whole search universe could be dubbed "electronic data card catalogs." How valuable would that be on Wall Street? Coca-Cola, fizzy sugar water anyone? The name's important.
Are You Positive?
"It appears to me that the assumptions with respect to the value of these stocks is missing something. Where or when in the calculation does the cash flow for each occur, and what is the relative loss per share of something brought into account that would reflect the ability of each of these stocks to survive in the real world?
"The fact that AOL has never had positive cash flow should not be compared to the same assumptions as for MSFT. Have I missed something here or do I just not understand how market capitalization compares to the relative perceived value per share at which these stocks are now trading at?"
Reply: Tales from the real world: November 6, 1997--America Online, Inc. (NYSE:AOL) today reported net income of $19.2 million, or $0.16 per share, for its fiscal 1998 first quarter ended September 30, 1997. Revenues for the quarter increased 49% to a record $521.6 million.
Even without the sale of its stake in Excite--$0.04 per share worth--AOL was still on the plus side. That's real earnings, backing up real cash flow. As for perceived value, like beauty, it's in the eye of the "beholden" (as in investor), not beholder.
Banking On What
"I am currently invested in the Atlanta Internet Bank (NASDAQ:NTBK) and am extremely pleased with its astounding growth rate. The bank's recent press release implied a 20% increase in accounts and a 29% increase in deposits in only two months.
"My question is this: With SFNB now solely concentrating on software, are there any other purely online banking institutions that NTBK is competing with?"
Reply: Publicly traded Internet banks are few and far between to our knowledge. Security First, which focuses on software, seems like a good move, but we still think Web-based efforts show promise. That said, we think that in the realm of savings, your hard-earned money, that a brand that's known for banking may hold wider appeal than an upstart. Many "traditional" banks have Web divisions for online banking.
So the line could be blurring, rivals may not be new entrants but old stalwarts, with deep pockets and heavy thud value marketing budgets. Atlanta Internet Bank's growth looks notable in spite of all this. But the battle really appears to have just begun. E*TRADE (NASDAQ:EGRP) made bold moves on the trading side. Maybe there's room for bold moves on the deposits side?
"The lawsuit has nothing to do with browser integration [ISR, Jan 16]. It has everything to do with violating the consent decree. The simple, unarguable, inescapable truth is that Microsoft required PC manufacturers to license IE in order to retain their Win95 licenses. This is a clear-cut violation of the decree. If IE were truly a part of the OS, there would be no suit."
"Microsoft makes the great Iron and Steel, Sugar, and all other Trusts from early in this century look like chicken feed. If anything, the DOJ has been late in checking this giant out. Microsoft should be treated just the same as the great trusts of yesteryear. Nothing less than open access to markets, information, and electronic business of every kind are at stake. No one company can be permitted to dictate how we access and conduct ourselves in the new cybereconomy of the next century."
"Steve, Wow. 'Dear Bill' said everything I have been thinking about and working toward for the last year and a half. The thing is, 95% of the market still doesn't get how to really make it happen and the rest of the world doesn't even know that it can."
Reply: While not everyone agrees that the Internet is indeed bigger than Microsoft (the point of the analysis in many ways), on an expanded note, the issue of controlling key software APIs appears to be vital to the question of value creation in this industry. Whoever "owns" those APIs may hold sway over communications and commerce in the 21st century. It's not browsers, per se, from our view, it's the APIs that tie it all into the PC/device. A browser is just another pretty face on the network. Our take: the APIs bind that face to the functionality that's key to the whole thing. You can build a lot off of APIs.
"Excellent analysis of the RelevantKnowledge numbers [ISR, Jan. 13]. One thing I try to remember about Netscape is that it gets many (if not most) of its eyeballs in a rather unique way--as the default on Navigator installation. I'm not sure that those numbers would be nearly so high if the browser share were less (which it is currently becoming every day).
"I'm not convinced that the company has built a network that can truly compete mano a mano with the likes of Excite, Yahoo!, Lycos, etc., of which browsers have to proactively choose to visit. As a result, I'm not sure its unique visitors are fundamentally worth as much.
"Microsoft gets some of this same benefit with IE default destinations. The difference is that it seems to be capitalizing on this in the content area while simultaneously grabbing browser share, whereas Netscape both lets browser share slip away and doesn't work hard enough to bring people in independent of the default."
Reply: That same argument could be flipped around--like giant Hoover vacuums, both Navigator and IE "suck" users in. It's a tremendous advantage over pure navigation sites that require proactive moves. The no-brainer default shows users a page of "content." Something that should have been exploited long ago? Absolutely.
Netscape could have been Yahoo!, Lycos (NASDAQ:LCOS), Excite, and Infoseek (NASDAQ:SEEK) combined, in many ways as the Internet "flagship" it was. The problem was, just like the search engines they all once were, they all were doorways to someone else's Web "site/store." Like the old 1970s T-shirt their mantra was "Just passin' thru." Exactly what Wall Street did to Netscape shares January 5 and 6 [see ISR, Jan 6].