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Security Matters: ISDEX Breakout Shows Top Gainers

By Steve Harmon   |    December 09, 1998
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The oft-repeated axiom that size matters must be recast as security matters, and it's about time. All year long we've said security could find legs and until recently all it had was weak knees. Since December 1, however, our breakout of ISDEX by sector shows that security led the way, up 16.3% while ISDEX overall went sideways with a slight gain.

Why security, why now? Once Internet stock fans stampeded through e-tailers in mid-November and then enablers around the end of November, about the only thing left from being focused on was security--the very nuts and bolts of making sure e-tail and e-commerce is secure. Here's the handy table (share this with a friend as an easy way to see how Internet sectors perform)--

ISDEX ®   08-Dec-98 % change Point change
The Internet Stock Index   close from from
www.isdex.com     01-Dec-98 01-Dec-98
         
ISDEX   231.71 0.7% 1.56
NASDAQ   2,034.75 3.5% 68.87
DJIA   9,027.98 -2.9% -273.17
         
ISDEX by group        
         
E-tailers        
Amazon.com AMZN $204.06 -2.6% -$5.44
Beyond.com BYND $26.00 4.5% $1.13
Cdnow CDNW $19.00 -16.5% -$3.75
Cyberian Outpost COOL $26.06 -4.8% -$1.31
Egghead.com EGGS $20.75 -17.6% -$4.44
eBay EBAY $176.88 -14.7% -$30.38
ETRADE EGRP $26.63 4.7% $1.19
N2K NTKI $14.50 -12.1% -$2.00
ONSALE ONSL $39.75 -26.7% -$14.50
  total $553.63 -9.7% -$59.50
  average $61.51 -9.7% -$6.61
         
Security        
Axent AXNT $28.75 12.7% $3.25
Checkpoint CHKPF $39.63 26.0% $8.19
ISS Group ISSX $39.13 15.9% $5.38
Network Associates NETA $53.81 5.5% $2.81
Security Dynamics SDTI $18.44 21.9% $3.31
Verisign VRSN $47.00 23.3% $8.88
  total $226.75 16.3% $31.81
  average $37.79 16.3% $5.30
         
Content/hubs        
AOL AOL $90.38 0.6% $0.50
Broadcast.com BCST $54.75 -12.4% -$7.75
CNET CNWK $50.44 -0.7% -$0.38
Excite XCIT $56.63 8.9% $4.63
GeoCities GCTY $34.38 7.4% $2.38
Infoseek SEEK $44.88 36.8% $12.06
Lycos LCOS $57.88 0.3% $0.19
Sportsline SPLN $17.50 -2.1% -$0.38
Yahoo YHOO $198.50 -3.8% -$7.75
  total $605.31 0.6% $3.50
  average $67.26 0.6% $0.39
         
Software        
Netscape NSCP $38.75 2.6% $1.00
Open Text OTEXF $18.50 3.5% $0.63
Realnetworks RNWK $35.44 -3.6% -$1.31
S-1 Tech SONE $24.00 9.7% $2.13
Spyglass SPYG $21.25 -13.3% -$3.25
Vocaltec VOCLF $12.31 2.1% $0.25
  total $150.25 -0.4% -$0.56
  average $25.04 -0.4% -$0.09
         
Enablers        
Broadvision BVSN $30.44 24.2% $5.94
CKS Group CKSG $28.50 -10.6% -$3.38
CMGI CMGI $73.25 -3.9% -$3.00
CyberCash CYCH $14.81 -7.4% -$1.19
DoubleClick DCLK $37.19 2.4% $0.88
Network Solutions NSOL $75.50 18.9% $12.00
Open Market OMKT $13.94 -11.2% -$1.75
24/7 Media TFSM $26.00 -5.5% -$1.50
US Web USWB $20.00 -9.6% -$2.13
  total $319.63 1.9% $5.88
  average $35.51 1.9% $0.65
         
         
High-speed/infrastructure        
Broadcom BRCM $100.75 11.2% $10.13
Inktomi INKT $122.13 -8.5% -$11.38
@Home ATHM $63.13 6.1% $3.63
Cisco CSCO $79.81 0.1% $0.06
  total $365.81 0.7% $2.44
  average $91.45 0.7% $0.61
         
ISPs/Access        
Concentric CNCX $25.56 -7.7% -$2.13
Earthlink ELNK $59.50 -9.8% -$6.50
Exodus EXDS $40.00 8.5% $3.13
IDT Corp IDTC $15.56 -23.6% -$4.81
Mindspring MSPG $68.00 8.6% $5.38
PSINet PSIX $19.25 -3.8% -$0.75
Verio VRIO $18.13 1.4% $0.25
  total $246.00 -2.2% -$5.44
  average $35.14 -2.2% -$0.78
News behind the moves:

  • 98.12.01 - IDT (NASDAQ:IDTC) reports its first fiscal quarter revenue jumps 143% to $133.3 million vs. 1Q98. Net income after tax reaches $4.9 million or $0.14 EPS vs. $0.08 EPS. Of total revenue, IDT's IP telephony unit revenue is $5.3 million, up 212% vs. same quarter last year, giving IDT reason to consider spinning off its Net2Phone division it says. IDT claims more than 1 million users of Net2Phone have used it, racking up 34.6 million minutes in the quarter, up 57% from the previous quarter.

    The odd thing about IDT seems that many telco firms are trying to integrate IP services, not spin them out. However, on a high-growth 10x revenue multiple Net2Phone could be valued at $250 million. IDTC market cap now sits at $471 million. So selling 20% or so to the public may free up some value here.

  • 98.12.02 - @Home (NASDAQ:ATHM), which owns a lockhold on most of the U.S. cable services to provide Internet services, agrees to acquire set-top applications and interactive TV company Full Force Systems. Undisclosed terms. The buy gives @Home engineering and know-how talent as it seeks to meld the worlds of Internet with TV in something we dub "Interactive TV, the sequel, or ITV-II."

  • 98.12.03 - PointCast may be close to selling to an Internet backbone according to buzz from Silicon Valley. If so, we think the deal makes sense for a larger ISP to leverage PointCast's technology to provide custom news and commerce feeds to corporations and consumers -- a regulated bandwidth solution to companies that, ironically, once banned PointCast from its employees due to bandwidth hogging.

  • 98.12.04 - uBid (NASDAQ:UBID), a Web auction service, jumps 220% from its $15 IPO price, closing at $48 per share. UBID climbed as high as $60.25 per share on its 1.58 million offer through Merrill Lynch, UBID opens at $40 and loses some ground to $34.125 per share in early trading before closing above its open.

  • 98.12.07 - EarthWeb (NASDAQ:EWBX) shares soar 58% today to $52 on a tout from its IPO underwriters led by JPMorgan initiating a "buy" rating. EarthWeb also signed 45 new ad clients for its site, which produces content and resources aimed at Internet professionals and Web developers.

  • 98.12.08 - Security Dynamics (NASDAQ:SDTI) finds some legs after a "buy" rating from SoundView and $30 per share target. we think Internet security has been the last bastion of stagnant stock prices all year, the only sector we think hasn't ridden the Internet runups.

    Perhaps some of it is rightly so: none of the firms in this space are aggressively consolidating the security market. That's the opportunity they've all missed, including SDTI. Another reason we think they've crawled along, while e-tail roars none of them have parlayed the security aspect of commerce into public awareness. The pop in ISDEX for security may be a sign that they've started to arrive on the radar.

    Attention Internet Startups! LaunchPad West StartUp Pavilion, part of Spring Internet World '99, one of the world's largest Internet industry trade shows offers exhibit space for startups ONLY at a reduced price in order to meet their often limited capital available at the startup stage. Contact Sean Moriarty (hurry, space limited): mailto:moriarty@mecklermedia.com