Steve Harmon's, take on BWEB 7/2/99 techstocks.com see>>>>>Steve Harmon of The Internet Stock Report
internetnews.com provides the following interview
with Mark Johnson, Editor of the IFC. Below is the write up.
Q: What is going on in the Internet sector and why did so many of the
Internet related stocks drop?
A: We had a big correction because of inflation fears. I think that a lot of
the Internet investors had to digest what a rate increase could mean to this
"high speculation area". Keep in mind, these are young companies that are
very volatile and risky in many ways. Not only because the technology
changes but because the market they are in changes very rapidly. Also,
access to capital maybe drying up. Suddenly, many companies may not be
able to deploy their business model globally like they want to.
Q: Currently, what new trends do you see emerging in the Internet
sector?
A: I think we are beginning the nuts & bolts, or the heavy lifting era of the
Internet. We are on the fringe of the "sexy cool" Internet phase, which is,
"wow, it is pretty cool, I can get a stock quote" or "oh, I can sell something
on eBay" or buy a book on Amazon. Those are some sexy cool things. We
are going into a deeper phase, I call a "heavy lifting phase," which is
business to business. It is more like an EDI (Electronic Data Interchange)
model where the Internet is handling your very boring but very bountiful
(in terms of revenue movement), information inventory control such as;
shipping, receiving, supply chain management. These are the kind of
inventory selling systems that EDI has typically done and the Internet is
taking over.
Q: Are there any stocks in the area you just mentioned that you think
could benefit from those emerging trends?
A: The stocks that can benefit are the heavy lifting PC companies or
computer companies. Dare I say IBM (IBM 131), Microsoft (MSFT 91
1/4) or Cisco (CSCO 64 3/8). There is such a wide area they are cutting
that these deep pocketed giants are among the few that can really deploy
across the whole chain. I think there is tons of opportunity for start ups in
the Internet area and existing companies that are public. One example is
Inktomi (INKT 132 1/2), they provide search and caching software.
Backweb (BWEB 26 1/4), which just went public, allows you to automate
and distribute digital information and digital products, like software or
videos throughout a corporate network. It is really a bandwidth manager
tool. You have companies like InfoSpace.com (INSP 48), a wholesaler of
content that aggregates and then disseminates information to over 1600
web sites. These companies can scale to the wider opportunity in the
business to business area.
Q: Steve, everyday I go online and see something emerging towards free
Internet access, where some company is willing to pay me to surf the web
or offer free Internet access. Can these companies actually survive in the
Internet space?
A: The notion of free Internet access started in the United Kingdom. In
Europe, it costs money to make a local call. Already you are paying for
your Internet access. In the states it is different, you do not pay for local
calls, therefore you must pay for access because it is not included with
local service. It could be, but the Baby Bells are greedy and they will not
give it to you. If they were smart, they would give you free access as part of
your phone service. They are not smart and have been beaten to the punch.
Consequently, it costs about $20 a month for unlimited Internet access.
Some Internet providers such as NetZero and a few others have come up
with free Internet access. You must put up with a constant stream of banner
advertising and give personal information. Keep in mind that it is not really
free. It is really just a trade off $20 per month for them to show you
advertisements all the time. Even when you pay for an online service, you
still have to view advertisements, so there is a fine line between what is free
and what is not. Free is not always what it is cracked up to be.
Q: Steve, I understand what you are saying, users would have to put up
with banner advertisements in order to receive free Internet access.
Could this concept of free Internet access be successful here in the
states?
A: NetZero has close to 1 million users and is one of the fastest growing
ISP's in the world. It can survive, it can be successful. I could open up a
restaurant in downtown Manhattan and give away free hamburgers, just fill
out a form as you come in. It is up to me then to say, "well how do I
recoup that investment?... how will the expenses get paid?... I hope I can
get enough advertisers and marketers to come in." The model does have a
chance to survive but, it is too early right now to tell if it will last. The
European model is different than in the states because they have different
toll charges over there.
Q: Let's touch base on some of your favorite Internet stocks. Do you have
a list of favorites that you follow?
A: I follow about 125 stocks. The correction that hit the market made my
life a lot easier. With values cut in half in a lot of cases, suddenly there was
a longer list of favorites to choose from. I still like America Online (AOL
112 1/8) a lot. They make the Internet experience an easy one. They have
walked the user through this fundamentally difficult experience.
Q: What other Internet related stocks do you find favorable during this
current correction in the Internet area?
A: As I said earlier, the correction made my life easier because all the
stocks were taken down. I like first and foremost the market leaders, who
are leading the segments they are in which are; eBay (EBAY 149 5/8);
Amazon (AMZN 122 3/8) and E*Trade (EGRP 39 3/4). Those are the
ones I like. Some of them have very large market capitalization's, but on
the other hand, they are the market leaders and have a lot of leverage that
they can deploy. The value hunter in me goes after; Inktomi (INKT 132
1/2), BackWeb (BWEB 26 1/4), InfoSpace.com (INSP 48) or XOOM.com
(XMCM 52 1/2), who will own a piece of the new NBC Internet. |
