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RealTime IT News

eMailbag Monday: Yahoo, Allaire, ISDEX, Isleuth

First reader up writes:

"Your comments on Alan Greenspan discovering the "I" were right on target (see ISR January 29 in Archives). Hey, maybe he should be delivered his own personal copy of your report everyday. Sincerely, High School Computer Teacher p.s. Bought YHOO on IPO, thanks to you."

Reply: It's no small thing that we believe the next 100 years to be the "information age" just as the last 100 were the "industrial age." Greenspan couched his remarks both pro and con about the Internet and also likened some of the stocks to a "lottery" mentality. We don't think all Internet stocks will be winners no more than all industrial stocks were winners.

However, BusinessWeek called the next century the 'Atlantic' century (Europe and North America). We disagree. The next century is borderless and global ecommerce, not geographic economics. Glad to see you made a few dollars on YHOO.

ISDEX Newbies

"Are you going to add more Internet related stocks into your Internet Stock Index soon? For example, I'm looking forward to see XMCM, ABOV, TGLO, MKTW...etc. recent Internet IPOs there. I really like that Web page with all the Internet stock listings, it really helps to see the overall picture of this Internet sector."

Reply: ISDEX is reviewed every quarter for additions and deletions. For new IPOs we occasionally add one to the lineup if it reflects a new segment or meets the criteria for ISDEX. Simply put, a company must derive majority or 100% of its revenue from the Internet and be representative of the sector it's in. ISDEX is an industry index that covers the gamut of the Internet on Wall Street including e-commerce, access, software, hardware, services, security, e-tail, and high-speed.

Sands Of Time

"It seems the emphasis is always number of Internet users or number of unique Internet users. I've been wondering if the time spent at a site enters into the value equation. Two things, probably unrelated but they got me thinking:

1) I saw a note on a message board about a lady who lost her free Web site due to exceeding her bandwidth. The company told her she had 57,000 hits to her site. She couldn't believe it as she is "nobody." As it turns out, she spends a lot of time in the (un-named) chat rooms and apparently every 10 seconds there is a refresh that has to get her thumbnail picture from her Web site. I don't know if this is multiplied by each person chatting who needs to see her picture or what. Anyway, "hits" can sure be misleading.

2) I've been wondering, if someone stays at a site for a long time, if the fact that they see many more banner ads and are perhaps a more "loyal" user than average, has any effect on a users value (company value).

I saw a report that said eBay is number two in total user minutes at 600 million something and Yahoo! is number one at 1.6 billion minutes."

Reply: Raw time on a site is valuable if (at least from a business perspective) the site can extract value from the user. That can come in the form of ad views, commerce, or marketing muscle extended by the user. However, time alone cannot gauge the overall efficiency of the user experience.

Several sites may deliver fewer page views but higher bang for the buck. eBay (NASDAQ:EBAY) is one example. Its users are not chatting about romance (as they do on AOL), grabbing free stock quotes (as they do on Yahoo), making free Web pages (as they do on GeoCities).

eBay's users engage in commerce almost if not entirely 100%.

That's why EBAY shares have soared. While we think EBAY stock may be ahead of itself -- and its ton of options could dilute it -- still offers the closest thing to my 'Zero Gravity' economic model: pure digital enterprise without any of the overhead.

When To Sell?

"What is your best guess as to what Allaire stock will do over the next 30 days? I bought 100 shares pre-IPO (my first, ahem, trade) at $20/share. It closed Friday at $51. I want to hold before I sell to recover investment until Feb. 5 to avoid Schwab penalty for flipping.

But I don't want to be able to unload for less than $40. Seems most Internet IPOs are at or above their offering price year to date, in most cases double or more for the most recent.

Reply: We don't give individual advice. What you do with Allaire depends on your tolerance for risk and reward and ability to sleep at night.

Taps

"Do you still feel a correction is on tap for the Internet group in the near future?"

Reply: Certain stocks in the Internet may do well and others may not. We believe the Internet should be analyzed on an individual company basis, that winners and losers emerge in this industry everyday. A correction came in early January and Internet stocks popped back up. This pattern has gone on for two years now, but especially the past 12 months. One person's correction is another's buying opportunity.

At the center of your question seems to be 'are Internet stocks overvalued?' A core group probably is not but the ones on the fringe -- those firms who carpet-bomb the PR newswire with press releases saying how they plan on upgrading their Web sites and are, therefore, now 'Internet stocks' are in for a rude awakening we think. We are also at a loss as to why anyone would buy Zapata shares after its first attempt at being a Internet company. Prove it first and then Wall Street will see it to believe it.

"What do you think about Isleuth.com, search engine now traded on OTC BB? How can I know more information about it? From Bologna Italy

Reply: Our opinion: Isleuth runs on the border of the many search sites out there. We don't believe it yet has the ingredients and presentation of a first-class search site along the vein of Yahoo, Excite, Lycos, or Infoseek. Isleuth has a lot of good info and links on its site but the navigation is cluttered. A lot of stocks on the fringe climb on endless hype but the proof is in the balance sheet. SLEU plans to be a full-reporting company but we remain prudently reserved of it until we see the numbers. Our hunch is there's not much revenue yet. We'll see. Ciao.


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