eMailbag Offerings: @Home, AOL, GeoCities & Versant

First reader up this week poses this question:

“Steve – Don’t you think it would be logical and natural for @Home and AOL to create a partnership? @Home’s attempt to become a “portal” seems to be a little late. Just making @Home the default page isn’t enough to overcome the branding of Yahoo, Excite and others.

But look at what they could do with AOL. Immediate access to millions of customers who are just dying for faster access. And for AOL…speed to access all of AOL much faster. Faster speed, more e-commerce, more $$$. Anyone who uses AOL at 14.4 or 28.8 knows how painful it is to currently buy anything. A match made in heaven don’t you think?”

Reply: @Home (NASDAQ:ATHM) is a cable Internet portal so it’s not competing with the “dial up” portals that snail-in through phone lines. Right now @Home and WebTV are probably the biggest threats that AOL has ever seen. Why? Both offer something AOL does not in two new platforms for content – cable Internet and Internet via TV.

Also, both are extremely well connected so to speak, with @Home locking in most of the cable firms that matter and WebTV being owned by Microsoft and attacking the couch potato market. Each has about the same number of subscribers, 300,000.

We think WebTV could be a serious threat to broadcasters, cable operators and every media company on the planet since it essentially looks like a means to take over the TV and Internet universes all in one swoop.

Forget the battle over digital TV and set top boxes, Microsoft is attacking TV with a cheap box and some clever software that combines TV and Web. This is why AOL bought struggling NetChannel, a TV Web rival.

AOL’s trouble is it doesn’t have billions in dividends streaming in through the sale of an operating system or desktop application to fund the future with. AOL’s best move? Acquire @Home and give away a NetChannel Plus box to all the cable subs in its agreement universe and current AOL subscribers. The revenue will come from all the new e-commerce deals that flow through that box and huge user base.

Or AOL can plod along and wait for @Home and WebTV to have 5 million subs each. Short answer: AOL needs a TV and cable strategy implemented ASAP.

New Picks?

“Do you have a specific date set for when you will announce the “6 new companies to watch for in 1998?”

Reply: We chose 10 stocks to watch for 1998 and indicated we may update some of the picks – despite the 100%-plus gains in the group year to date. One or two may need tweaking as the Internetscape changes. Look for a few more stocks to watch very soon in this space.


“This is an inquiry regarding the Geocities IPO offering. Do you know the date of Geocities IPO offering and the price at which it is offered? Also, will I be able to purchase Geocities IPO directly from my broker or will I need to purchase it from their underwriter? Any comments will be highly appreciated.”

Reply: GeoCities, the leading ‘Websteader,’ is a private company and hasn’t announced any plans to do an IPO yet. Although given the hot market on Wall Street for market leaders we expect GeoCities to go public this year if the outlook remains favorable.

Part of the challenge for Web companies, including the IPO PointCast announced just last week, is in showing investors it has a real business with real revenue. It’s one thing to count a gazillion users or page views. At the end of the day what matters is revenue and means to a bottom line.

Hiring a new CEO and embarkation on e-commerce and advertising moves seem to indicate GeoCities’ path to profitability. The thinking is that high user traffic will lead to opportunities in e-tail and commerce. It may but it’s not always a given. We think GeoCities could get there and maybe even then some – but it still has to get there. Tapping the public market for capital would certainly give it a huge start.


“Hello Steve, what do you think of the future for Versant Object Technologies, the company with the lowest share value in The Internet Stock Index?”

Reply: Versant’s (NASDAQ:VSNT) technology has always been what we consider the leading edge of where the Web could be regarding object-oriented databasing. Getting its story heard above the noise of the marketplace has been tough, however, and management changes have only added more confusion to the tale. However, we would view Versant more from its revenue results and customers.

Sales increased first quarter 20% to $4.6 million but losses also grew, $5.9 million vs. $1.1 million 1Q97. Customers include AT&T, Alcatel Network Systems, British Telecom, The Chicago Stock Exchange, EDS, HNC Software, Lucent, Sabre Decision Technologies, Scotiabank, Siemens, Texaco and TRW. These are heavyweights with tremendous data flow. The short take: Versant, in our minds, may best be served as part of a larger firm where it can ride stronger sales and marketing channels.

Note to readers: this week in ISR we get inside the numbers of the PointCast and NetGravity IPO plans. The early indication on PointCast looks like it seeks a fully-diluted $340 million valuation, or 17x annualized revenue multiple. Let us know now what you think about that, e-mail to [email protected]. Tomorrow we give you our in-depth report.

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