Hottest Internet Stocks: Diverging Dot.Coms On Wall Street
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Excite (NASDAQ:XCIT) filed Feb. 24 to sell 3.9 million shares in a secondary offering that will raise almost $170 million. We think the move could vault it head-to-head with Yahoo! (NASDAQ:YHOO) in a race for first in the navigation space.
Yahoo! can also do a secondary and cash up beyond the $100 million it's sitting on. Welcome to the new game: whoever has the cash wins or has a better chance.
That's because "deep pockets" Microsoft is on the horizon. In the fall, the company will debut a start page that brings together Expedia, Investor, CarPoint, etc., with search and directory, and free e-mail (HotMail).
Yet we've only just begun to Net, 1% of the world. Just when you thought the Internet "big idea" race was over, and firms such as Netscape, Yahoo! and Amazon all landed the prime real estate, the end of the beginning may change all that. It's what we call "factor x," the notion that every new user on the global computer network becomes a potential producer-commercial entity-competitor-ally.
Notably, the vertically-focused stocks did the best the past week. TCI, which owns a chunk of @Home, selected the firm to implement its set top box, sending shares in the cable Internet service provider zooming.
We think @Home (NASDAQ:ATHM) could very well be the next AOL, only faster and more media-centric. Give it five years. On the down side, @Home management ran Silicon Graphics before heading for the ISP. The same Silicon Graphics that bet big on mainframe computer Cray by acquiring it just as low-end PCs began to eat the graphic workstation market.
Trusted Info (NASDAQ:TISX) ran on a buyout from Network Associates (NASDAQ:NETA), and we expect more deals in the Web security space soon as firms merge to compete. A lot of separate components need to be brought together in a suite of offerings.
The new winners on top are focused players--we expect more of that as the Internet gets too big for any one firm to dominate. It's like trying to dominate the gross national product at some point.
ISDEX Feb. 17 - 24
|ISDEX ®||Ticker||24-Feb-98||% change||Point change||% change|
|Internet Stock Index||symbol||close||from||from||from|
|ISDEX Geometric Average||130.12||4.7%||5.90||30.3%|
|ISDEX Price Wtd. Composite||986.72||3.6%||34.64||24.9%|
|Trusted Information Systems||TISX||$ 20.13||82%||$9.06||101%|
|@Home Network||ATHM||$ 36.31||31%||$8.56||45%|
|Sportsline USA||SPLN||$ 22.75||21%||$3.94||112%|
|Open Text||OTEXF||$ 16.38||18%||$2.50||22%|
|Earthlink Network||ELNK||$ 51.50||16%||$7.13||100%|
|America Online||AOL||$ 119.06||6%||$7.06||32%|
|Open Market||OMKT||$ 15.88||6%||$0.88||65%|
|CheckPoint Software||CHKPF||$ 41.75||2%||$0.63||2%|
|CMG Info||CMGI||$ 41.63||1%||$0.25||38%|
|Security Dynamics||SDTI||$ 33.81||0%||$0.06||-5%|
|CKS Group||CKSG||$ 18.00||-3%||-$0.56||27%|
|Network Solutions||NSOL||$ 19.88||-3%||-$0.63||51%|
|Security First Net Bank||SFNB||$ 10.56||-3%||-$0.38||46%|
|Versant Object Technologies||VSNT||$ 7.94||-4%||-$0.31||-43%|
Feb 24: Lycos (NASDAQ:LCOS) signs a three-year agreement with magazine subscription firm The Electronic Newsstand which will pay the search and navigation firm $10.5 million over three years to promote its services on Lycos' Network. Another example in the developing world of goods and services paying for distribution at the Web networks.
Feb 23: Trusted Information Systems (NASDAQ:TISX) agrees to be acquired for $300 million stock or 0.323 shares from Network Associates (NASDAQ:NETA). The $20.188 per share offer is a 60% premium to the price of Trusted Information shares, which closed at $12.625 Friday. We predicted consolidation here and think more may come. See ISR, October 10, 1997.
Feb 20: DoubleClick (NASDAQ:DCLK) goes public at $17 per share and surges more than 70% before backing off and closing up more than 50% on its first day of trading at $26.75 per share. Shares price above range with more shares offered, 3.5 million. The $60 million proceeds should help this Web-ad pioneer push forward. DCLK originally sought to sell 2.3 million shares at $13.
Feb 19: WorldCom highlights its Internet division (which is the formerly publicly-traded UUNET) revenue at $102 million for fourth quarter, up 101%. Full-year Internet revenue reaches $566 million, up 124%. With MCI, we think the Internet percentages here could take off beyond the impressive results so far.
Feb 18: N2K (NASDAQ:NTKI), which sells music via the Web, posts 1997 revenues of $11.3 million vs. $1.7 million for 1996. Net losses for 1997 reach $28.7 million or $5.88 per share vs. net losses of $19 million or $6.85 per share for 1996. Fourth quarter ended December 31, 1997, is $4.8 million vs. $679K 4Q96 with net loss of $13.2 million, or $1.26 per share, vs. a net loss of $6.5 million or $2.21 per share 4Q96. In the $15 billion music industry this is still a rounding error. Yet we think 5% of music could be sold via the Web within two years. $1.5 billion up for grabs.