RealTime IT News

eMailbag: Readers Ask - When Do The Big Boys Strike?

First reader up this week is a reader with this question:

"Outfits such as Time-Warner and News Corp., not to mention the Bells, have the talent, circulations and know-how to blow out of the water all those internet-related outfits you mention. With no anti-trust in Washington, or the states, what's keeping them from taking this business over? Worldwide ? And what's the role of Madison Avenue in all this? Will Time-Warner buy an ad agency to fill out the old multi-media portfolio? Sticking close to the existing internet players is fun. Why not a cut at the big picture which seems to be this: by the end of the roaring 90s,all media will be merged --Madison Avenue, TV, news, books, Hollywood etc. It will likely be something on the order of Time-Warner-Interpublic. So, when will the big boys move is the only question from my perspective."

Reply: They're moving in now. Look at all the URL references you see on TV shows. Go to the Web for more info they say. Dateline NBC is doing a lot of this. ABC network promos show the logo for the network and ABC.com at the bottom. Movies have URLs now as common as they show previews. Magazines have URLs under the masthead. Fortune, Forbes, BusinessWeek, etc. Newspapers. Wall Street Journal, dowjones.com. On and on.

So they've already moved in. But they haven't displaced any Internet firm or player. They are seen as "also rans." Tied to their traditional media model they have tremendous difficulty treating the Internet as its own powerful medium. Each treats it like an extension of its old-fashioned business.

When the automobile came along how many railroad barons started making autos? None because they kept making railroads, that was the business they understood, the one that paid the bills.

Their organizations are set up to do the railroad's business and a freeflowing roadway is something they cannot comprehend. They're rubbing sticks together in their Internet efforts while Internet entrepreneurs discuss fission for this critical mass.

On Guard

"I was writing for clarification on your analysis of the Internet security stock Cyberguard (CYBG). Your report had indicated it was undervalued in comparison to its brethren -- but did you mean that $10/share CYBG had the ability to go up to the $40's like its fellow security companies, or is it the "Infoseek" of the internet security stocks. I guess what I'm asking is: How undervalued did you think the stock is, and how high do you expect it to go, in comparison to ISSX and VRSN?"

Reply: Since we reported on our thinking that Cyberguard (NASDAQ:CYBG) may be undervalued relative to its peers and the industry valuations it has had a run. So the gap may have closed already. We still think consolidation could draw out more value in many of these security software stocks, including Internet Security Systems (NASDAQ:ISSX) and Verisign (NASDAQVRSN). In the absence of any bidders, however, we don't expect much more than twitching to the market's gyrations.

Yahoo, On The Money

"i just searched internet.com and found this, and man were you on the money! http://search.internet.com/plweb-cgi/fastweb?getdoc+search+InternetNews+1906+1+wAAA+market%26cap

i think market cap per page view is more reliable than market cap per unique user, i can explain why, it's more related to the total attention, that's why yahoo is off the scale value because of all those page views which implies more user attention. i think there might be an even better measure, but of the two above, i think /pv is better. do you agree?"

Reply: Market value per page view favors content aggregators more while I think market cap per user favors commerce sites that may have a page full of deals. One wants your time (time = money via ad banners per pages viewed) while the other wants your money up front (no ads, or page view hunting, needed).

Listed?

"Is your stock info available on a listserve? I've stumbled across a few ISDEX articles on the web, but seem to be finding them only at random, usually through Yahoo!. I invest in internet stocks, but often find them difficult to track, find analysis on, etc. If possible, where do I subscribe?"

Reply: Email sub sign up via www.isdex.com. But we think the Web view is a little better since you can look at news, charts, tables, etc. and Yahoo Finance has done a great job packaging it there. To follow Internet news and industry happenings related to ISDEX then Internetnews.com is the answer. For people, technology and capital try it on Upside.com.

"Have you ever done any research on a company called go2net (GNET)? Its seems to be a comparatively lesser known navigation site that has a pretty good search engine. It has a pretty small cap and when I first found out about it, was priced below Infoseek. But it has exploded over the past couple of weeks to the extent that it has surpassed Infoseek in share price.

I agree with your past comments that for I-net companies, public mindshare has a lot to do with the share value, but GNET seems to go against the grain as its been pretty low key in terms of advertising and press releases. So I can't figure out why the sudden surge. Do you have any insights or is it purely the general bull run on internet stocks?

Reply: Go2Net boasts 60 million monthly page views and about $100 million market cap. Its sales are not strong, however -- about $5 million expected this year. Between its three sites, the search, game site and stock site it seems to have attracted a following. For now we attribute the run in Go2Net (NASDAQ:GNET) to search euphoria. We'll keep watching it, however, and where it ends each quarter and the year in numbers.

Top 10 Picks Hot

Dear Mr. Harmon: To say the very least, your Morning Report of 12-31-97 (Top 10 Web Stocks To Watch [for 1998]), has so far this year proved out to be an absolutely fabulous prognostication. By my calculations, year-to-date (through 4/14/98) the entire 10 stock portfolio has a net gain of 156.4%, and without a single loser in the bunch.

Regretfully, I did not happen upon your report until just recently. My question is, for someone investing in internet stocks tomorrow, would the best picks for the coming 12 months be the same 10 or would there be changes, and if so, what would the current list be? Also, of the 10 you would pick at this time, which of those would the top 3 and top 5?

I understand that whatever information you should provide in response would not in any sense be a recommendation on your part, but simply information to begin my own research into to arrive at my own independent investment decision.

Thanking you in advance for any response and information you can provide me with respecting my inquiries."

Reply: We said in ISR Dec. 31, 1997 that these were the top 10 to watch for 1998, not just January to April. There's more than half the year still to go. For anyone content with 150% returns, however, they must ask themselves: when to sell? For some, maybe now. Others, maybe not. We are reformulating a top 10 for the second half of 1998 and some of these may be on that list also.

ISDEX A Mutual Fund?

"Could you please tell me how or where one might buy the "ISDEX", Internet Stock Index. If one is unable to keep track of individual stocks & various companies' businesses then perhaps buying the index would be the smartest approach."

Reply: We're approaching a few top tier mutual fund groups to see if they'll listen to the interest it has and license it to make a fund. Also, readers who are interested may want to do the same. After all, customers have a lot of sway in getting results. We get dozens of inquiries daily about this....maybe if Fidelity and Vanguard got emails and letters from readers???

Mozilla In Everyone?

Dear Steve: First of all I want to tell you that I love your report. It's one of the few things in my day that I truly look forward to getting. I think you should be running Netscape! You would make them the broadcast channel they should be. The CBS of the internet!

Now... The real opportunity??? PSI net is a cheap stock that has 250+- points of entry across the country. I am constantly reading about the IP long distance providers and how they may have to cough up the local access money to the baby bells. The loop hole. ISP's are considered exempt from those fees. So am I missing something or... are national ISP's going to be worth a lot of money to the Qwests and Level3's of the world. I am interested in your input.

Reply: WorldCom (NASDAQ:WCOM) is the model in our opinion--it rolled up services to get where it's at--buy vs. build. Eventually ISP will be be just "communication providers." Somebody may need PSINet in the bag of offerings to complete the global AND local loop--because very soon it will be one and the same. The Internet is doing away with "distance" as primary model--now it's services that matter.

By the way, about Netscape. If anything, if Infoseek and the other portals are $1 billion-plus entities then we think Netscape could be a $1.5 billion entity on Web presence alone, perhaps even more than $2 billion. And that's still way under half of Yahoo's market cap.

We think driving this could be all those new Navigator baby-browsers that may pop up everywhere and at least part of them point to the mother site, which is now a guide and aggregator. Netscape's brand is synonymous with the Internet in many ways. Now its Web site must be made into that association also. Commerce to follow.