CyberCash was one of the pioneers
of the Web, having a spectacular IPO. In 1996, the company’s shares soared to $66.
Unfortunately, the stock has been dead money since then.
Currently, the stock is selling for a modest $7-3/4, for a market cap of
$191 million. Although at this price, CyberCash does seem tempting for
investors seeking out bargains.
Of course, with the Web exploding, it makes sense that there is a huge need
for transactional services. In this light, CyberCash looks like a great
infrastructure play.
In the last quarter, the company showed some strength. Quarterly transaction
volume was 24.8 million and the number of merchants climbed to 22,500. While
the company has many small business customers, this is starting to change. A
major client is hrblock.com, which is the tax site for the powerhouse H&R
Block. In February, the site accounted for more than one million
transactions.
Despite this, revenues were still quite small, about $6 million. What’s
more, the company continues to lose money. Losses were $8.6 million. The
company has $13 million in the bank account.
Perhaps the biggest problem is the prospective competition. Take the mighty
UPS. The company recently announced that it will provide electronic bill
payment to its customers. It is a great solution, which allows for buyers to
track the status of their goods (for example, payments could be adjusted if
the goods are damaged). Moreover, VeriSign is rapidly becoming a force, as
it purchased a payment service company called Signio.
As a standalone company, CyberCash will likely have a difficult time. And
the market recognizes this, placing a harsh valuation on the stock. Yet, the
company has a full-suite of software, a great customer base and strong brand
name. This should be attractive to larger companies that want transaction
services. Actually, it does seem strange that the company has not already
been purchased. But if the stock continues at these levels, the company may
have no choice.
