E-Mailbag Monday: IPO Blues, eToys, PONs

What’s on tap for the IPO market?

Reply: It is definitely dark times for the IPO market. The IPO
calendar has dwindled to almost nothing. What’s more, for those companies
that have gone public, most had to reduce the number of shares and the
offering price.

Bleakness in the IPO market is likely continue for several months. Actually,
there appears to be no hot IPOs for this week — at least for the Net
marketplace.

eToys: Worth Playing?

What do you think of the prospects for eToys?

Reply: With the brick-and-mortar players coming online, it is a harsh
world for vertical e-tailers. For these e-tailers to grow, there needs to be
huge spending on marketing, as well as investments in infrastructure. This
is why eToys. (ETYS)
had a $48.4 million loss in its latest quarter. Revenues were $23
million.

Unfortunately, investors have turned-off their wallets to such e-tailers. As
for eToys, the company says it has enough cash to last through this year.
But, the company also forecasts it will break-even by 2002 — assuming sales
reach $750 million to $900 million. In other words, the company needs money.
In this tough IPO market, the terms of a recapitalization are likely to be
tough. It would probably be wise to stay away from this company for now.

What is a PON?

Reply: Expect to hear lots about this over the next year. PON stands
for passive optical network.

Of course, optical fiber is a great way to transfer huge amounts of data
quickly. But getting this data directly to homes is no easy feet (known as
the “last-mile bottleneck”). With current technology, it is prohibitively
expensive to do this.

With PON, the last-mile problem becomes much less expensive. The technology
basically means there is no need for the installation of an optical
transceiver or a full fiber strand for each customer (the strands are
split).

The market is expected to grow fast. According to Communications Industry
Researchers, the total market is forecasted to grow from $36.9 million in
2000 to $762.9 million in 2004

Currently, the innovators in this marketplace are at the start-up phase.
However, it is likely that these companies will hit the IPO market.
Examples include Quantum Bridge
Communications
and Terawave.


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