Internet business stocks take center stage
By Dick Satran
SAN FRANCISCO, June 28 (Reuters) - Suddenly, the Internet
is all business.
After a long period in which well-known consumer brands
like Yahoo! Inc. <YHOO.O>, Amazon.com Inc. <AMZN.O> and America
Online Inc <AOL.N> were star performers, the stocks of
companies that help others set up online shops are taking
center stage.
Analysts have long predicted that the so-called toolmakers
-- companies that work behind the scenes to build the
infrastructure for doing business on the Internet -- would have
their day.
But for a long time investors didn't want to hear about it,
especially with the first wave of name-brand Internet stocks
performing so stunningly. Now, with the best-known Internet
stocks having fallen 30 percent to 50 percent since April, the
less flashy business-to-business providers have gotten a fresh
look.
Leading consumer sites, meanwhile, have been hit by worries
that marketing costs are mounting in a hypercompetitive
environment in which many new players, fueled by IPO cash, are
fighting a massive branding war.
The new wave can get the benefits of all that frenzied
activity by selling to the companies competing on the Web,
without having to pay the marketing costs.
"This second wave of companies is all about
mission-critical applications for people doing e-commerce,"
said Jack Staff, economist at Zona Research.
Ariba Inc.<ARBA.O>., which tripled in value on its first
day of trading Thursday, is typical of the very unglamorous
wave of new businesses. It helps companies procure supplies
over the Internet. It might not be a sexy Web site, but it's
fitting the current vogue of sites with more tangible revenue
streams than ad banners and a share of e-commerce revenues.
"For a lot of institutions that have been uncomfortable
with the (high) valuations of Internet companies, the
business-to-business model is more acceptable," said Andrea
Williams, analyst with E-Offering, the online investment bank
aligned with Goldman Sachs and E-Trade Group. "These stocks
haven't seen the runups of consumer stocks."
Apart from Ariba, CareInsite<CARI.O>, which handles medical
supplies over the Internet, has more than doubled since its IPO
June 16. Persistence Software Inc. <PRSW.O>, CyberSource Inc
<CYBS.O>, and Software.com <SWCM..O>, are other
business-to-business players completing strong initial
offerings during the week.
Also soaring in initial offerings are companies that
provide "bandwidth," the high speed Internet services that help
e-commerce sites win sales. One such site, Juniper Networks
<JPNR.O> had its initial offering price hiked twice due to
strong investor demand, and it still doubled in value when it
began trading Friday.
"First wave" Web sites, meanwhile, are having a harder
time. Online magazine, Salon.com Inc. <SALN.O> limped out of
the starting gate with a $10.50 per share initial stock price
Tuesday then eased to $10 in the week, even though it's one of
the best known and best regarded content sites on the Internet.
The trend toward more business-like sites isn't just
limited to initial stock offers, but also appears to be
shifting to the established technology companies whose business
is helped by the growth of the Web.
Oracle Corp. <ORCL.O>, which had been struggling to get the
message out that it's getting a huge amount of Internet
business, finally is getting a response. Even though its
database is used on nine of the top 10 e-commerce sites, it has
been largely passed over. But it's stock now is up 50 percent
from the year's low.
Cisco Systems Inc.<CSCO.O> ,whose routers are the building
blocks of the Internet, recently touched an all-time high and
is trading at 100 times earnings. Similarly, International
Business Machines Corp. <IBM.N>, Hewlett Packard Co. <HWP.N>
and Microsoft Corp. <MSFT.O> have been touching their best
levels ever, after spending much of the year trying to convince
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