First reader up this week writes: “Dear Steve: NSOL has been up 372%. Do
you think NSOL will go up any more this year?
What is your prediction?”
Reply: Suppose for a minute that the 10 million U.S. small
businesses all register a domain some day. Network Solutions (NASDAQ:NSOL)
effectively holds a monopoly on domain name registering in the U.S. for
popular domains with “.com,” “.net” and a few more. The .com is the most
valuable.
On December 31, 1997 we selected NSOL as one of 1998’s ‘top 10 to
watch’ based on its default leadership status and the real effort it would
take any rival to overcome its lead. Through November 13, NSOL at $68.50 per
share was up year to date 422%.
Its Web site could use some work, making
it easier for people to register, more intuitive, more user friendly, with
other features all integrated. We think 1999 could see Network Solutions
extend its lead further by partnering with ISPs and others for registration
services. For now NSOL stock seems to have enjoyed a huge run, so we’re not
sure how much it has to gain this year.
Who’s Home?
“About the @Home model: how important do you
believe providing relevant, customizable (news,
weather, etc.) content over high speed Internet access will be such as @Home
or ISPs becoming content providers through DSL?”
Reply: The demand for more bandwidth increases exponentially. One
side effect of more users using the Internet is the need for more capacity
for more users. And existing users demand faster speeds. The threshold
isn’t in sight, but we don’t think that anything resembling interactive TV
will be the nirvana point.
One reason stocks such as @Home
(NASDAQ:ATHM), Broadcom (NASDAQ:BRCM) and Inktomi (NASDAQ:INKT) soared this
year (or from IPO) relies on this blend of attempts at bringing more
bandwidth to the home.
We also believe that the Internet may hybridize
into devices and provide different functionality across platforms so that
high-speed may not be necessary to receive email, for example, on your
phone, but that if all phones, pagers, TVs, fridges, VCRs/DVDs, video game
systems, etc. are Internet-enabled, you can see how more bandwidth must be
provided to meet the multiplicity of new connections. By 2002 we forecast
that more than 100 million non-PC devices may be connected to the Internet
in some manner. So it’s beyond content, it’s sheer, raw demand by devices
that’s coming.
Spyglass
“I was wondering, what’s your opinion on SPYG? General Instruments
recently bought 5% of this company, and SPYG will be producing
software/technology solutions to 3 of the biggest box makers: MOT, Nokia,
and GIC. Co. has no debt and about $30 mil in cash. SPYG just finished an
embedded systems trade show in San Jose and released some new device
browser software. Any thoughts?”
Reply: Spyglass (NASDAQ:SPYG) has one of the most experienced
teams anywhere producing embedded Internet systems in devices, which was a
natural evolution from its early days as a browser firm that licensed its
code and customized it for various customers (including Microsoft’s first
browser, which was based on Spyglass technology).
It’s come a long way
since those early Net days and now rides the forefront of the Internet
device revolution. Coincidentally, we spoke with Spyglass CFO Gary Vilchick
last week and he said the relationship with General Instrument represents a
minimum $20 million of revenue to Spyglass over the next three years, the
largest transaction for Spyglass since it refocused the company on the
device market.
Also, Spyglass will establish a Digital Software
Integration Center in Boston which will be staffed with up to 45 engineers,
Q/A and
technical support staff. Its first focus is the emerging cable set-top box
market which GI is a leader in. Spyglass also develops embedded Internet
software for Windows CE and Personal Java platforms.
Onsale Sells B2B Next
“I saw that the Onsale.com (ONSL) Business-Business auction site is
online … Onsale has their hands in person-person auctions with Yahoo
which compete with EBAY, Onsale is online in Japan, the Onsale Web site is
selling computer electronics, business products, office supplies, food and
travel packages … this stock is selling at just $21.5 with a 6 million
share float … do you expect Onsale.com to stay at this price much longer?
Reply: We’ve always believed that the auction model is one of the
first truly Web-enabled ways to do commerce. That sentiment goes back to
when Onsale (NASDAQ:ONSL) first went public at $6 per share and nobody
“bid” on it. eBay’s IPO (NASDAQ:EBAY) added some more excitement to the
potential with its personal auctions.
But the real heavy lifting and
deal flow may come from the business to business auction action simply
because the dollar volume (or pound, yen or peso, etc.,) is much bigger. By
the way, we’ve had a lot of e-mail the past few days about Onsale’s debuting
this industrial auction site.
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