eMailbag Monday/Tuesday: Excited @Home, MarketWatch, Earth Springs, TicketMaster
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Cable Internet provider @Home(NASDAQ:ATHM) kicked off the four-day trading week Tuesday by announcing it is buying search engine Excite in a stock swap valued at $6.7 billion. Our early analysis shows the fit may be a good one: combining next-generation speed with first-generation audience, giving the two a bridge to the future. Why does Excite need an exit?
AOL's $4.2 billion pending deal for Netscape (NASDAQ:NSCP) alters the landscape. Lycos' (NASDAQ:LCOS) move to be a community hub and Infoseek's (NASDAQ:SEEK) deal with Disney all leave Excite in a distant second to Yahoo.
While the others have made moves Excite has not, yet. Yahoo has the luxury of being a leader but Excite could leapfrog the others in the cable Internet space with Tuesday's deal.
Also fueling the logic of a deal, in our opinion, is Excite's deal with Netscape for guides may be a short-termed thing if AOL does indeed take over Netscape. The deal brings back to the forefront the age-old debate of if the large Web sites may become acquisition targets for large media companies.
And now from the emailbag (special holiday Jan. 18/19 edition) first reader up writes:
"Marketwatch.com closed at $97; Data Broadcasting closed at $22. CBS owns 38 percent of MKTW and DBC owns 38 percent of MKTW. I can't understand how MKTW is valued at $97 and DBCC is valued at $22? Would you please shed a little light on this for me? Would you hold DBCC if you owned it?"
Reply: Marketwatch (NASDAQ:MKTW) stunning first day trading -- it closed up 473.53 percent from IPO price -- seems to indicate that investors found its story unique among the Internet group. There aren't any Internet-based financial content producers public, or at least not in the same vein as Marketwatch.
We also attribute the huge gains to short-term buys. On why MKTW zoomed while co-parent company which it was spun out of dropped, in this case DBC (NASDAQ:DBCC), people would perhaps rather own the shares first-hand rather than through another entity.
On owning DBCC or not, we don't give buy, sell or hold recommendations. Everyone's investments should be of their own choosing and according to their own criteria for risk and reward after doing their own research--it's your money. For our original report on Marketwatch Click here.
"Dear Steve: I enjoy reading your Internet Stock Report, I find it well thought out and useful, but I do have a question concerning your ELNK & MSPG comparison (see ISR January 15). The Street does seem to value MSPG more than ELNK, but could that come from MSPG making money and growing bigger by acquisitions and great service.
If ELNK had not teamed up with Sprint where might they be at today? What MSPG has accomplished so far they have done without the help of a big brother with deep pockets and if a big telco comes along and takes a look at MSPG (so go the rumors) where might they go from here. Steve thank you for your time and thanks for your work on this Internet Stock Report. Keep up the good work."
Reply: One of the key differences as many readers pointed out is Mindspring's (NASDAQ:MSPG) profits. Our analysis, however, tends to view both of these firms as similar services and always shooting for the future more than the present.
We believe the next wave of Internet usage will be bigger, faster, wider, deeper and stronger than the current one. The real pay day will begin when your grandmother, grandson, cousin and everyone else uses the Internet as commonly as a TV or telephone. So today's earnings don't matter as much as investing in tomorrow.
Right now the ISPs and others are warming up for the main event, nothing short of ubiquitous access, anywhere, anyone, anytime--but most of all easy, fun and compelling.
Earnings do matter but remember that CompuServe was once profitable before H&R Block fumbled the ball while for years AOL (NYSE:AOL) posted losses until it reached what we dub "chain reaction" (the part after critical mass).
Ticket To Paradise?
"Was wondering why Ticketmaster/CitySearch is not included in you list of Internet stocks? This seems like a good solid co., will also have an auction site, and yet it isn't moving like other Internet stocks? Any reason?"
Reply: We follow TickeMaster/CitySearch (NASDAQ:TMCS) and think Ticketmaster/CitySearch holds a lot of potential but it's not clear how ticketing and city info guides click yet. Is this an e-ticket to paradise or a search for bigger and better things. We're talking with its CEO soon and will bring you the interview here.