Article in SmartMoney & Dow Jones: item 2 of 2
One group that seems to have attracted a lot of interest
is the Internet-hosting companies -- the outfits that help
get corporations up and running online. Janus Venture
(JAVTX), a fund that specializes in small-cap stocks, is
a big holder of three hosting companies that made our
list. Exodus Communications (EXDS), Globix (GBIX)
and Verio (VRIO). As of July 31, Globix was the fund's
fifth-largest holding. Exodus ranked ninth and Verio,
11th.
Will Bales, co-manager of Janus Venture, says all three
companies are well-positioned to take advantage of an
Internet outsourcing trend. Someone has to get
companies connected to the Internet and manage their
Web pages, and that's often something a company --
especially a non-tech firm -- isn't able to do in-house.
That's why he favors these behind-the-scenes Internet companies as opposed to sexier e-commerce
plays. It's still much too early to predict who will win out in online retailing, Bales says, with so
many sites out there for customers to choose from. "That's somewhat of a crapshoot," he says.
"But we do know that traffic is going to grow every year, so we buy companies that enable traffic to
get there."
Globix is a small company (with a market cap of just
$354 million) that focuses on Internet connectivity and
Web hosting for midsize and large companies such as
Microsoft (MSFT), RealNetworks (RNWK) and Dow
Jones (DJ) (a co-owner of this site). Exodus, a midcap
company, has a similar approach, with customers such
as eBay, Yahoo and Lycos (LCOS). The two companies
also have the highest institutional ownership on our list,
at 88% for Globix and 74% for Exodus.
Verio is more of a low-end host company; its customers
tend to be small businesses. Jim Callinan, manager of
the Robertson Stephens Emerging Growth (RSEGX)
fund likes the company because it has been an active
consolidator in a fragmented industry. Last month, for
example, Verio agreed to buy digitalNation, a privately held Web-hosting company. As of July 31,
Callinan's fund also held Globix and Exodus. Like Bales, Callinan says hosting companies are
difficult to ignore given the steady flow of new Internet traffic. "Corporate America is coming onto the
Net in droves," he says. |
