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Technology Stocks : CMGI What is the latest news on this stock?
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To: bargainman who wrote (13354)9/29/1999 11:46:00 AM
From: James Thompson  Read Replies (1) of 19700
 
OT - Steve Harmon letter to Steve Ballmer

From steve@e-harmon.com Wed, 29 Sep 1999 02:05:43 -0700
Date: Wed, 29 Sep 1999 02:05:43 -0700From: Steve Harmon steve@e-harmon.com
Subject: NetStock! by Steve Harmon 1999.09.29 Dear Steve Ballmer
Dear Steve Ballmer:
Having been an Internet stock analyst for 5 years now and seen the
valuations of the tech and Internet sector rise with the prospects of the
new tech ecomomy it was interesting hearing the news the other day where
you said Internet and tech stocks were overvalued. Some are, some aren't.
And then I remembered that July 24, 1997 you said the same thing only just
pertaining to Microsoft stock.
I noted at the time (July 1997) that Microsoft stock was trading at about
$34 per share back then (split adjusted). September 28 MSFT closed at $92
1/8 after the market had adjusted MSFT per your comments.
Flashback to summer 1997 and split-adjusted Yahoo (YHOO) traded at $8 per
share; Amazon (AMZN) at $2 and change; AOL (AOL) at $8 per share; CNET
(CNET) about $7; @Home (ATHM) at $10; and my-then favorite and
totally-undiscovered CMGI (CMGI) at $1 31/32 per share.
While I agree that we have seen a phenomenal rise in the tech and Internet
sector it is based more on a key shift to a service-based model.
Service describes an open channel from producer to end user that is ongoing
and based on the flow of content and commerce. It contrasts with the
application software model which sells units or licenses and not a channel.
In a service model a company such as Yahoo is able to continue to bolt on
new services and therefore revenue streams; or Amazon can put up more
digital shelves and put more goods on those shelves; AOL can sell long
distance, leveraging off its installed 20-million user base and billingsystem.
It remains to be seen whether or not companies like AT&T (T) can do this,
take their existing pipe and installed base and become more of a
communications and commerce platform rather than just a telco which
acquired a cable company. Service over pipes.
Intel (INTC) is also becoming a Net service provider and opening data
centers that can act as hubs for commerce/content. It is late to the game
but that's a far cry from silicon. So Grove is making the switch toservices.
In January 1998 in a report I mentioned that the Internet was now the OS,
that Yahoo and AOL and all large-traffic sites now played key roles in
navigating content and commerce and applications, which began to migrate to
the servers.
As services became more prevalent the value of the channel (direct via the
Net) began to influence the Internet stock sector. Investors who missed the
early Internet bandwagon only looked back in regret at missing YHOO at
under its IPO price which it traded at briefly following its April, 1996
IPO. YHOO was a $3 stock in July 1996 and at its IPO I said it could be an
AOL killer. Now 3 1/2 years later YHOO closed September 28 at $184 11/16
per share.
As the Internet moves into broadband with DSL leading that charge investors
re enthusiastic about the newer issues, thinking that this may be a
renaissance of opportunity to get in on the next wave. I was there from
1994 before the first wave and this new wave has echoes of the past --
except that now 34% of all investors now own Internet stocks.In 1994 nobody did.
In 1995 a few of the bearded ladies harley davidson investment club mayhave.
In 1996 the ladies shaved.
In 1997 the real wave of Internet IPOs began in earnest
In 1998 Internet stocks finally shot up as investors began to believe it
was more than hype or biotech genetic sampling oozing down the techscape
In 1999 mainstream Internet investing began to emerge. I agree that there
may be too much enthusiasm for the entire tech and Internet stock universe.
Investors should take stocks on a case by case basis. Especially as the
business-to-buiness wave now arrives.
In 1994 I bet that the Internet would be the future at a time when everyone
thought interactive TV was it. In 1999 I am betting that the next 10 to 15
years will transform every business and household with an array of
Internet-driven services.
I agree tech and Internet stocks are overvalued here and there and a
pullback for those individual stocks should be in order. Yet still the
entire 300 pure play Internet stock universe market capitalization still
barely touches 2x MSFT market cap.
p.s. I am a big fan of what Microsoft has done in embracing the Net.
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