Closing The Gap? WEBDEX Led By Excite, MSN-HotMail, Infoseek

On a value per user basis this week’s WEBDEX shows Yahoo (NASDAQ:YHOO)
trading at a 4x premium to the average user value for the top 10 Web sites.
Kind of puts things in context when you consider that even with a 27% rise
since December 2, Infoseek’s user base trades at 16% of Yahoo, and still a
slight discount to the other peers.

SEEK popped on the anticipated debut
of its venture with new pal Disney (NYSE:DIS) called Go.com, which could be
the litmus test for if the new DisneySeek makes sense.

For despite doing
the Mickey Mouse chant to the tune of $430 million for 43% of SEEK,
Disney’s majority option rights take SEEK out of the mix from another
buyer, we believe. In other words, Disney should consider its options here
and ways to increase SEEK shareholder value.

Ironically, from the documents we’ve seen, Disney holds the right to buy
SEEK control for $50 per share, the way the document looked to us. With its
equity position “effectively” giving it control, however, it may not have
to.

In that scenario you have to wonder if both Disney and Infoseek were
privately held, combined forces, and then went public, that the perception
on Wall Street may be a bit bigger than the $1.3 billion market cap.

We’re waiting for Disney’s famed leverage to emerge here…and
waiting…just waiting for the go in Go.com.

We’re shaving some value off
Compaq’s (NYSE:CPQ) Altavista unit which it inherited when Compaq acquired
Digital. A yawner so far. We think Inktomi (NASDAQ:INKT) owns search with
its sleek wholesale styling and snazzy design vs. Altavista’s pure RPM or
horse power-is-king model.

Compaq has the chance to turn Altavista into
something powerful or it can divest the traffic to another large Web
player. We’re generous with the $700 million here and think an actual deal
may fetch much less.

About the only undervalued (compared to the group)
one we see looks like GeoCities (NASDAQ:GCTY) which just completed its buy
of Webring.

The thing about communities that casual observers miss is
that its users are much more attached to using them than a directory or Web
hub in some ways.

Why? Users have their own personal creations up there
for the world to see. While GeoCities and other ad-based Websteaders may
not have found the ultimate business model they have found a better user
model in our opinion.

We don’t think the last iteration on communities’
business models has been sounded and expect these sites to evolve rapidly
to leverage their user bases and relationships.

Microsoft’s (NASDAQ:MSFT)
best buy on the Web it ever made was HotMail we believe. HotMail now adds
something like 1 million users per week.

I recall when founder Sabeer
Bhatia presented at my investment conference at Spring Internet World in
Spring 1997. Yes, the usual “hockey stick” growth projection slide was
used. But HotMail has more than hockey sticked, it’s been more
moonshot.

Here’s one take on how to realize the value for Microsoft,
satisfy some of the anti-trust brigade, and unleash some capital flow: why
doesn’t Microsoft spin off MSN/HotMail/Expedia/CarPoint in an IPO? We think
it could be a $6 billion combined entity already and find legs that may
take it north of $15 billion in short order once public.

Plus, it would
make it easier for Microsoft to not dilute its shares further with options
to the Internet firms in its fold, give it a tracking stock as currency for
deals, and also not dilute demands on future earnings if/when options are
converted. Maybe Bill and Greg (CFO) will consider that?