E-Mailbag Monday: Bid.com, theglobe.com and Sycamore Networks

Tom’s readers e-mailed him over the weekend with queries about Bid.com, theglobe.com and Sycamore Networks.

Hi Tom:

What’s your opinion on Bid.com?

Reply: Bid.com (BIDS)
has been on a roller coaster with a high of 22-5/8 and a low of
3-1/4. The stock is now trading close to its low: 4-13/32.

And the troubles are likely to continue. Last week, the company announced
that its third quarter earnings would fall below analyst expectations.

The main reason is that the company is having difficultites in licensing
its technology and finding partnerships. Estimates were for the company to
have annual revenues of $50 million. But, it looks as if the company will
only hit $30 million.

The brutal fact is that the auction space is Darwinian. There are so many
other well-funded, cut-throat competitors in the industry — which should
continue to make Bid.com’s stock sickly.

Theglobe.com: It’s a Small World After All

Theglobe.com seems to be at a low valuation, especially after last week.
Is this a good time to buy?

— Jan

Replay: It’s hard to believe that theglobe.com (TGLO)
was the biggest IPO ever (605 percent on its first day of trading). Now, the
stock is trading at 11-1/16 and a $293 million market capitalization. It’s
kind of like the Internet “walking dead.”

Last week, theglobe.com warned Wall Street that its third-quarter earnings
will fall below analysts’ prediction for sales growth. Consequently, the
stock plunged 18 percent on Friday.

Such an announcement is definitely odd, given the fact that many other Net
companies seem poised to post strong surges in the upcoming earnings

Also troubling was the announcement that the company had delays in two
major products: globelists.com (network of e-mail user clubs) and uPublish
(a home page builder).

But the biggest danger sign? Bear Stearns lowered its rating on the
company from “attractive” to “neutral.” It was Bear Stearns that took
theglobe.com public.

Bear Stearns has concerns that theglobe.com’s new products will have
problems making any money. Actually, it looks as if this is the case with
much of the products of theglobe.com.

For example, in the latest quarter, theglobe.com had sales of $4.1 million
and losses of $6.7 million. To finance the burn rate, the company will need
to access external capital. Unfortunately, with a stock price so low, this
will be a difficult task.

Sycamore Networks: This Week’s Blockbuster IPO?

The Net stocks got whacked last week. Will this hurt IPOs for the upcoming
week? How will Sycamore Networks do?

Reply: This company is likely to do well regardless of market
conditions this week. Wall Street has an insatiable appetite for
infrastructure companies, such as Foundry Networks and Juniper Networks.

Sycamore Networks should do the same. In a nutshell, Sycamore develops
products that transport voice and data across fiber networks. The
products go by the phrase of “intelligent optical networking products.” In
the traditional model, the process of routing data traffic is fairly
inefficient. As for Sycamore, its solution streamlines the process — yet
does not require much capital equipment improvements.

Who are the customers? Well they include the big-boys, such as foreign
telephone companies, cable operators, ISPs, long distance carriers and so
on. Although, the company has only one customer: Williams

But the customer list should start to increase.

All in all, expect this IPO to be red hot.

Here are the valuation metrics:

Sycamore Networks


pro forma IPO


Shares offered


Price target/actual




Shares out



IPO market cap


less working cap


plus LTD


Enterprise value


1999 Revenues


1999 Losses


Annualized rev.



Sycamore Networks


Revenue multiple


Rev. multiple


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