WEBDEX: Could $16B Buy Top Web Sites?

For 7% of the entire value of Microsoft (NASDAQ:MSFT) you could acquire the
top 8
Web sites and basically own the Internet’s leading gateways. That is, if
they’d sell
for market prices, which they won’t. So, let’s add a 50% premium in a
hypothetical bidding scenario and bring the total to $25 billion, 10% of
MSFT market cap. Is there a value gap one way or another?












































































































































Mecklermedia’s

July

Sept 2

Sept 9

Sept 2

Sept 9

Percent

WEBDEX

Users

Market cap or PMV*

Market cap or PMV*

User

User

change

 

(millions)

(millions)

(millions)

Value

Value

 

Yahoo

26.6

$7,284

$7,495

$274

$282

2.9%

AOL.com*

22.0

$2,500

$2,550

$113

$116

2.0%

Excite

17.3

$1,409

$1,326

$81

$76

-5.9%

Netscape.com*

17.6

$1,700

$1,750

$96

$99

2.9%

Microsoft.com*

18.6

$2,200

$2,250

$118

$121

2.3%

MSN.com/Hotmail*

16.3

$1,250

$1,225

$77

$75

-2.0%

GeoCities

14.2

$719

$782

$50

$55

8.8%

Lycos

14.5

$966

$927

$67

$64

-4.1%

Infoseek

12.2

$594

$600

$49

$49

1.0%

Disney.com*

9.7

$1,200

$1,100

$124

$114

-8.3%

TOTAL

169.0

$19,821

$20,004

$1,050

$1,051

0.1%

AVERAGE

16.9

$1,982

$2,000

$105

$105

0.1%

*private market valuation estimate for Website only. Estimates based on
revenue, users, growth, brand, mergers and acquisitions, comparables (c)
1998 Mecklermedia (NASDAQ:MECK)


The public stocks in WEBDEX shown here don’t seem “undervalued” to any
great degree at this juncture. Perhaps MSFT could be overvalued in a world
where any one of the above firms or 25 other Websites in the millions of
user range draw users as easily as Windows does.


Said another way, the most talked about, read about, stock-driven
“successes” in the Internet commands only 1/10th the recognition on Wall
Street
as just one company: Microsoft.


But combined, the top 8 non-Microsoft
sites draw a user base that rivals Windows in many ways, and increasingly
acts like an OS (as predicted in Internet Stock Report way back in January
this year).


The nature of a PC now is an Internet device. No
consumer buys a PC for word processing or spreadsheets any more. These are
core offerings, but the “sexy, cool” part of a PC sale is Internet
connectivity.


For the period September 2 to September 9, the publicly-traded Web sites
connected with a mixed of gains and pains. The biggest rise came in GeoCities
(NASDAQ:GCTY), up 8% to an average $55 per user. That followed last week’s
hammering when anything remotely connected to “free” and “losses” was
anathema to investors running for the exits.


The return to semi-glory for
Internet stocks brought life back to Yahoo! (NASDAQ:YHOO) at $282 per user,
although the ‘we try harder’ Excite (NASDAQ:XCIT) lost ground, down almost
6% to $76 per user. There’s 271% more expected out of YHOO than XCIT at
that rate. More e-commerce, ads, marketing coups, etc.


At the same time,
with Netscape Netcenter and Microsoft MSN/Start, suddenly the browser comes
back to the center of the value proposition once more as the default home
page points to each, with real content there. All of the above, except
GeoCities and AOL.com, built their businesses as Netscape (NASDAQ:NSCP)
search partners. Each leveraged the Netscape platform to create their own
platforms.


Meanwhile, we think MSN/Hotmail or Microsoft.com may be
jumbled in the launch of the new MSN (or Start) or whatever it ends up
being called. HotMail, for example, now seems more like a word mentioned on
MSN and less a brand, now that it’s part of the larger site. That costs
valuation, in our view.


Brands can grow and develop loyalty, and
“subordinating” HotMail may not be the way to maintain its
identity/value.


MSN valuation, meanwhile, may be on the rise after its debut as a starting
point/destination/commerce site/news
hub/all-in-one bonanza default Web site for Internet Explorer. That default
may be the single biggest weapon Microsoft and Netscape have for their
future–and respective valuations.





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