First reader up this week looks for the techno angle:
“What is the technology that will make the sites much more interesting, in multi-media format . . . that might cause someone to change entrance points. Will this technology be available to all immediately or will one site gain a technical edge? Any thoughts?”
Reply: There are several technologies that already make Web sites much more multi-media including Java (from Sun Microsystems, NASDAQ:SUNW), Shockwave (from Macromedia, NASDAQ:MACR), ActiveX (from Microsoft, NASDAQ:MSFT), and RealAudio/Video (from RealNetworks, NASDAQ:RNWK). Another interesting stock from our perspective is InterVU (NASDAQ:INVU) which makes animated ad banners possible.
“I wondered what you thought of the future growth possibilities of NEWZ?”
Reply: NewsEdge (NASDAQ:NEWZ) leads the market in delivering personalized news into the corporation and consumer market, far more than rivals that are after the customized segment.
As you may recall, NewsEdge was formed as the result of a merger between Desktop Data and Individual. Perhaps the only drawback at this juncture in our minds is that the name isn’t as well known as other “Internet” brands. And many of those brands scour the Webscape looking to “brand” new areas to grow into, sort of like shoehorning themselves into growth.
In short, perhaps NewsEdge needs more brand edge also.
“If you amortized Excite’s $70M payment to Netscape over two years, using conservative numbers, how much did they pay per user? Might be an interesting way to evaluate the deal. I smell a Netscape/Excite merger, do you?”
Reply: As a reminder, Excite agreed to pay Netscape $70 million over the next two years to provide it with search services. Excite gains ad revenue from the agreement and we think marketing deals could also emerge here.
If we estimate that Netscape (NASDAQ:NSCP) has 60 million browsers floating on the Web that’s $1.17 per browser that Excite (NASDAQ:XCIT) agreed to pay. Or we could forecast 7 million users of Netscape NetCenter by the end of 1999 and that puts Excite’s deal at $10 per user. We think the agreement may have opened the door for a merger. Try before you buy.
If you think about the trend of what Netscape seems to be doing, giving away its code for developers to start making their own Netscape-like browsers, and if the firm gives away its server tools, then it would be a return to its roots.
Netscape grew out of university efforts and it would be ironic if its software and tools return to that free sharing arrangement. If Netscape chooses to go forward sans software development then we think a merger with Excite would be much easier as two Web sites combine.
One Up On Wall Street
“You are better than any analyst on Wall Street. Keep up the good work, ask for a raise, and enjoy the Net.”
Reply: Mom, please stop emailing me. Seriously, I firmly believe that empowering the individual to make better investment decisions is one of the best things that the Internet can do. That’s my goal. That means to be as objective as possible and I (hope) think that comes through. I’m not pushing stocks or recommending them, rather saying “here’s the scenario, make up your own mind.”
“What’s your opinion of KTEL now that its Web site is up?”
Reply: KTEL (NASDAQ:KTEL) stock had a meteoric rise based on the hype surrounding its decision to launch a Web site May 1. As we said in our recent report on KTEL, simply launching a Web site doesn’t necessarily make a company an “Internet” stock.
Of concern to us also is KTEL’s thin float, about 900,000 shares, and insider ownership of majority of shares outstanding. That could put pressure on the stock in an environment where those that sell stocks short come in to play.
On the other hand, KTEL owns an extensive catalog of music hits. That means its margins are far better than standard resellers like CDnow (NASDAQ:CDNW) or N2K (NASDAQ:NTKI). And we foresee the day very soon when downloading music to a recordable CD will be commonplace.
So after choosing your favorite hits from KTEL’s Web site you may simply be downloading them to your r-CD. Without having to burn a CD and ship it to you, KTEL’s margins could be very strong, more than 50%. So we’ll be watching KTEL to see if it’s more than a one-hit wonder.