eMailbag Monday: PointCast, Oz, GeoCities & More
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"What's the latest on GeoCities and PointCast's planned initial public offerings?"
Reply: As far as we know, they are both on track, albeit very different tracks. See ISR June 16 in the archives for our take on GeoCities and ISR, May 19 for PointCast.
Just got word that PointCast dropped its Chinese edition roll out because of the "Asian" crisis. Our rough translation: Perhaps PointCast needed to focus more on its core U.S. market where many corporations have banned the bandwidth hog from being installed.
PointCast missed its IPO window in 1996 and passed up a rumored buyout offer from News Corp in early 1997 that was supposedly in the range of $450 million.
At the product level, broadcasting information to intranets will be a huge market. Companies will seek to regulate bandwidth as an expense item. If so, PointCast must make the transition from bandwidth leper to bandwidth tool and money saver in an era where Microsoft's 'active desktop' makes anyone a broadcaster.
The Wizard Of Oz
"What do you think of OzEmail (NASDAQ:OZEMY) and News Corp (NYSE:NWS) or perhaps Bertelsmann?"
Reply: News Corp (Murdoch) might be a good candidate to acquire OzEmail, the leading Web site down under. Its latest quarter showed revenue growth north of 100% vs. 1Q97. But several of OzEmail's board members came from Kerry Packer newspaper/media operations. Packer is Murdoch's rival.
There's less than a handful of media players in Australia who could make a run for OZEMY. Our analysis shows OZEMY trading at about 5x annualized revenue, which leads to the thought: why not an AOL, Yahoo!, Lycos, Excite acquire?
"Lately there is much talk about the big media companies wanting to 'get extended exposure' on the Web through search engine sites, i.e., NBC/CNET, DIS/SEEK, ATT/AOL (no way), etc. It's hard if not impossible to sort out who the real Internet search engine contenders are for possible merger or takeover/buy out. I think it would be really helpful if you would share your views on this in your daily stocktalk."
Reply: CBS is rumored to be looking at Lycos (NASDAQ:LCOS). As for the rest, we could see any number of combinations of old and new, big and small. Not just media types. We believe there's too many security software firms vying for small pieces of the total secure solution.
We don't think the smaller stocks will be independent much longer in the security group, smaller meaning those below $200 million market capitalization with strong products. The larger firms have failed to act when their shares were peaking, which would have been great deal currency. So they may be targets themselves now from more diversified software firms, the global giants. We'll address the dealscape more at length in an upcoming Internet Stock Report.
"I understand that Amazon.com is a very well managed company with excellent prospects. Does it mean the stock is worth $92+ per share! Could you please explain your views on this stock."
Reply: See ISR, April 24 for our last report which cast a favorable eye on Amazon's prospects. AMZN has doubled since then (post split). New chapters (this is where the plot thickens) here in our book say Amazon may do well if it can keep the customer engaged, and create a swirl around the retail idea. None of its businesses are particularly fat margin enterprises, even with Web cost efficiencies. Amazon may gain 3% or 4% net income over land-lubbing rivals in books, music and video, but retail in that space is not a blue sky endless upside.
Longer range, Amazon becomes more of a media outfit than "store" and that may put it at war with AOL and Yahoo!, among others.