From the Globe:
CEO Godin pumps up Bid.Com
Calls company a 'little jewel'
but stresses need for coverage by U.S. analysts
Mark Evans
Technology Reporter; Source: Bloomberg Financial Services; Datastream
Wednesday, June 9, 1999
Toronto -- In a role that combined equal parts of evangelism and cheerleading, Paul Godin told shareholders at Bid.Com International Inc.'s annual meeting that the on-line auction house is poised for greatness.
"Bid.Com is a little jewel and this year we will polish it and show it off," the chairman and chief executive officer said at the Monday meeting.
The corporate boosterism before a standing-room-only crowd was an easy sell for a company that has quickly become an investor darling.
Some observers say the biggest challenge evaluating Bid.Com's strategic direction and financial progress is the lack of analyst coverage -- a situation that has not changed even though the company started to trade on the Nasdaq Stock Market in April.
Mark Pavan, an analyst with Yorkton Securities Inc., was savaged by investors in April after he issued a report that downgraded Bid.Com to an "underperform" from a "speculative buy" because of concerns about rising competition and lower margins. Yorkton had raised nearly $30-million for Bid.Com through three private placements.
Mr. Godin said getting U.S. analyst coverage is a high priority and he hopes that meetings with 35 to 40 analysts this week in New York will bear fruit.
Without analyst coverage, it is also difficult to gauge Bid.Com's market value because traditional methodologies such as price-earnings are not applicable in cyberspace.
Bid.Com shares jumped to hit a closing high of $30.70 on the Toronto Stock Exchange in late April, giving the company a market capitalization of about $1.5-billion. Since then, the stock has dropped. It closed yesterday down 25 cents to $13.55.
Bid.Com aims to break out of the on-line pack by leveraging its technology, including its patented Dutch auction process, which involves prices starting high and then declining until all items have been purchased.
It also hopes to generate multiple revenue sources by licencing its technology to companies looking to offer on-line auctions.
"We see ourselves as the Intel [Corp.] of on-line auctioneers," said Chris Bolger, an executive vice-president with Bid.Com.
The licencing of technology is a key component of Bid.Com's expansion into Europe.
After it opens an office in Dublin next month, Mr. Bolger said Bid.Com wants to strike deals with partners with Bid.Com's technology providing the high-tech auction horsepower behind the scenes.
Bid.Com also has its sights set on the business-to-business auction market to complement its business-to-consumer service.
Forrester Research Inc. expects the business-to-business market in the United States to jump to $52.6-billion (U.S.) by 2002 from $7.7-billion last year, while the business-to-consumer market will rise to $19-billion by 2003 from $1.4-billion.
Those numbers are compelling but Erica Rugullies, an analyst with Giga Information Group in Cambridge, Mass., said she has a list of 70 auction houses in the business-to-business market -- an area that is becoming more specialized with sites devoted to particular industries rather than offering a broad range of products.
Although there are concerns about Bid.Com's prospects, Mr. Godin faced few difficult questions from shareholders, and demonstrated an ability to handle anything that might have been contentious.
This was most evident during the question period when Mr. Godin pre-empted inquiries about why he recently sold 10 per cent of his Bid.Com shares after the stock had risen to more than $23 (Canadian) on the Toronto Stock Exchange.
"It was primarily done for estate planning," he said, adding that there are only narrow opportunities for insiders to sell shares because of their knowledge of financial results and strategies.
Similarly, Mr. Godin brushed aside concerns about the fact that Mississauga-based Bid.Com had first-quarter revenue of $5-million -- a drop from $6.4-million in the fourth quarter.
He cautioned investors "not to get caught up in sequential trading because it is a self-fulfilling prophecy of doom. If you continue to say that every quarter you will increase sales, you will eventually hit a wall."
Bid.Com sells a lot of consumer electronics and computers, which are big sellers in the fourth quarter because of U.S. Thanksgiving and Christmas. But Bid.Com has been billed as a fast-growing Internet company and seasonal factors are more relevant to more mature businesses, analysts say.
While Bid.Com has its critics, senior management believes the company has the weapons to become a major player in the on-line auction business.
To demonstrate its progress, Mr. Godin spent considerable time outlining the company's strategy and its recent achievements. He even took a subtle shot at San Jose, Calif.-based eBay Inc., the best-known auction house in cyberspace.
"We are not an electronic garage sale," he said. "We provide something that's fun and entertaining."
Bottom Line
Although Bid.Com's senior management sees nothing but good times ahead, some observers say it needs to attract analyst coverage and post improved financial results to win over skeptics.
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