eMailbag Offerings: PointCast, PSINet, RealNetworks, Mutual Talk?

First reader up this week:

“Has PointCast set an estimated date (or at least week or month) for its’ IPO?”

Reply: When any firm first files for an initial public offering an exact date is not given because there’s a whole process involved in filing, updating that filing, going on a ‘road show’ where senior management talks with institutional investors with the underwriters and, meanwhile, everyone is watching the overall stock market to see if it looks as if it will embrace the new offer. Stay in touch with the underwriters and ask them as the time line progresses. We’ll also be keeping our eyes open. To get our pre-IPO look at PointCast gaze on over to ISR, Morning Report, May 19 in Archives.

Network Solutions

“What are the prospects for NSOL? I keep reading many stories both positive and negative about the prospects for the stock, and I don’t know what to do with the few shares that I own?”

Reply: Our opinion of Network Solutions (NASDAQ:NSOL) is that businesses the world over may end up wanting a “.com” domain name because it conveys “business.” Right now Network Solutions provides that and has done so for a number of years now. Yes, competition will likely come, but Network Solutions has all the “.com” sign ups so far, ones that may renew with it in lieu of switching to another registrar. As far as your shares go, that’s up to you, depending on your risk tolerance and goals.

Sky-High Or Grounded?

“Earthlink has enjoyed a marvelous run-up and recently a run-down. Any thoughts as to why? Also, your opinion on ELNK’S long term value as the “#2″ ISP would be greatly appreciated.”

Reply: We think Earthlink (NASDAQ:ELNK) has done a good job of marketing through a series of alliances with others but that the hiccup in its shares may be due to its recent announcement to sell 3 million shares. As you know, this will dilute the company’s shares outstanding and earnings per share pro forma.

On a larger issue we think ISPs and Web navigation sites may be headed for a collision in the race to provide de facto “online services.” Eventually, what may happen here is all these individual pieces of a “complete” Web guide/services/access provider may band together into three or four large “brands” that can make inroads into the hugely competitive and noisy global space. Not marketing alliances, mergers. So there’s plenty of shaking and shake out to do for the next few years.

ISDEX Mutual Fund?

“Are there mutual funds out there that deal with the isdex? I own a mutual called the NetNet from Munder funds, and am very happy with its performance. Just looking for another mutual.”

Reply: If the customer is king, then we suggest you take your request to the fund king, Fidelity. We know Fidelity is reviewing the idea of making ISDEX a mutual fund, having had a reply from its CEO about ISDEX. But what if 40,000 ISDEX readers on the Web made their wishes known? The ball is in your court.

Very PSI

“Why do you never mention PSINet? Rarely is it mentioned as a high flyer. It’s up over 150% so far this year, and has the best plan for the future–Internet telephony. It has better valuations than some companies you listed today(5/21)?”

Reply: We’ve mentioned PSINet (NASDAQ:PSIX) many times and also noted its run this year. PSIX is actually up 122% year to date through May 22 at $11.375 per share. The interesting thing in our opinion is that PSINet market capitalization is $580 million while smaller revenue rival Verio (NASDAQ:VRIO), which went public May 12, has a market cap of $781 million. Perhaps that ought to be the other way around by our view, especially with PSINet’s fiber deals and more-established network.

Real Extremes With Microsoft

“I was hoping you can explain this puzzle to me. Microsoft has a big chunk of RealNetworks, nevertheless the company acquired Vxtreme, developed Netshow very quickly and is now competing with RealPlayer. Is RealNetworks going to be the next Microsoft victim?”

Reply: There is no puzzle to those of us familiar with Microsoft’s modus operandi: buy one, build one, or do both and see which wins. In a highly volatile developing industry such as the Internet field, Microsoft’s moves indicate that even the 800-pound gorilla doesn’t always win the poker game. It has to put a few chips on more than one game, toss a few bluffs and never ever let anyone see it smiling.

For reference: last year before RealNetworks (NASDAQ:RNWK) went public, Microsoft (NASDAQ:MSFT) acquired a 12% stake in RealNetworks for $8.99 per share or $30 million, with an option to acquire as much as 23% at $13.48 per share. It also paid RealNetworks $30 million to be able to peek under the hood on Real’s products in a licensing deal.

Despite Microsoft, RealNetworks has some real critical mass in our opinion. Here’s the stats straight from the firm: “More than 85% of all web pages on the Internet with streaming media use industry leading RealAudio, RealVideo or RealFlash and more than 145,000 hours of live RealAudio and RealVideo programming available each week. The RealPlayer, with more than 43 million end-user downloads and 21 million registered and active users, is one of the most popular software applications used on the Internet.”

We think the game now is to see who can outlast the other, and who can be seen and heard over the long haul.

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