Deals in the Internet sector bring investors into the sector once again after a few weeks of downward trending. Consolidation emerges as a driver of valuation much as it did earlier in the year in round one of merger mania. This looks like round two. ISDEX gains 5% to 573 as NASDAQ beeps up slightly to 2526.39 and the Dow sees some profit taking.
CMGI (NASDAQ:CMGI) stock is held by FMR, Fidelity’s parent company, which announces it holds a 10.3% stake in CMGI. Interesting if you recall January 6 in my outlook report of hot stocks to watch for ’99 that I mentioned any portfolio manager that didn’t have CMGI in its portfolio should retire. Fidelity apparently listened.
The question now is: Is CMGI fully valued? I can see the way clear to CMGI being valued at double its current level. To me this is not a earnings story it’s a holding company story. With CMGI you get a basket of Internet firms in one stock. Also, CMGI’s story relies on solid visionary management and I put Dave Wetherell at the top of my short list.
NBC (NYSE:GE) agrees to acquire Xoom.com (NASDAQ:XMCM), and combine it with CNET’s Snap (NASDAQ:CNET) into a new firm called NBCi, a new Internet company owned by NBC. It will include NBC.com, NBC’s station affiliate Web effort Interactive Neighborhood, multimedia site Videoseeker.com, and a 10% of soon-to-be beefed up CNBC.com. Pro forma, assuming debt conversion by NBC into equity, who owns what: NBC 53%, Xoom.com 34%, CNET and Snap.com 13%. More and more I think these TV-Web deals could accelerate.
Network Associates (NASDAQ:NETA) plans on buying back $100 million of its stock over the next two years. The security software firm’s shares have been hammered by the recent accounting debacle and slate of lawsuits that followed.
Digital River (NASDAQ:DRIV) expands its electronic-software delivery to include other digital and analog products. The new effort is dubbed ‘CommerceBridge’ and positions Digital River in the e-commerce outsourcing market. This is where both DRIV and Beyond.com (NASDAQ:BYND) need to be to make the leap to the larger opportunity outside of simply software. Software looks attractive on its own but a suite of e-commerce delivery services looks better to me. This is how giants are made. Bravo to Digital River.
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