VerticalNet: Sum greater than the parts [Interesting CMDX reference]
Thom Calandra's StockWatch
By Thom Calandra, CBS MarketWatch
Last Update: 11:16 AM ET Sep 21, 1999
SAN FRANCISCO (CBS.MW) -- The whole is greater than the sum of
the parts. That's what Chief Executive Officer Mark L. Walsh of
VerticalNet says about his company and the shares of another Internet
high-flier, Internet Capital Group.
VerticalNet (VERT: news, msgs), a $1.26 billion
company with only $17 million of projected sales
for this year, uses the Web to connect businesses
to other businesses in so-called vertical markets
such as waste management, chemicals and food
ingredients. Walsh, a former America Online
executive, says his Philadelphia-area company has
47 of these verticals, most with Web sites like Solid
Waste Online and Pollution Online.
Walsh counters critics who say VerticalNet's
market capitalization, thanks to its steady stock, is
bloated. He says VerticalNet's 47 online
commercial Web sites, soon to be 53, all have the
potential of surpassing stand-alone commercial
Web companies such as Chemdex Corp. (CMDX:
news, msgs), a $750 million company that aids in
the buying and selling of life science products.
"Our Bioresearch Online did more revenue than
Chemdex," says Walsh. "In some ways I think we
are undervalued compared to some of these market
makers."
Walsh's company has just seven months under its belt as a publicly traded
company. "If I am a shareholder, I can buy VerticalNet and say that some
of their 47 verticals will grow, their global deals with grow," he said.
In the same way, an early backer of VerticalNet, Internet Capital Group
(ICGE: news, msgs), is extremely valuable because its many holdings
comprise a broad Internet portfolio with great promise, he said. Internet
Capital Group's stock has been nothing short of remarkable, doubling
since August to a $12 billion market capitalization. (The stock was up 20
percent in a day earlier this week.)
Internet Capital, besides
a large stake in
VerticalNet and US
Interactive (USIT:
news, msgs), owns
pieces of other
commercial Web sites
that aid in the selling or
buying of industrial
goods and services.
They include
Breakaway Solutions,
ComputerJobs.com, Commercequest and Universal Access. The holding
company's stock, yet another newbie in the stock market, has overtaken
that of another holding company, CMGI Inc. (CMGI: news, msgs), which
owns an $8 billion market value.
"Portfolios always beat stand-lone companies in any marketplace I have
ever seen," says Walsh, who founded AOL Enterprise, a unit responsible
for business-to-business services.
Goldman Sachs & Co. analyst Rakesh Sood says commercial Web sites
will generate $1.5 trillion of business by the year 2004. Prime categories,
according to Sood's research report, include computer parts, chemicals,
electronics and medical equipment.
Walsh says VerticalNet will continue to buy and launch editorial-driven
Web sites that serve as meeting places for commercial buyers and sellers
of goods. The company, which has 400 employees, just launched
www.e-dental.com, a marketplace for dentists. Walsh says he also will
spend money to launch international versions of his Web sites. Some 40
percent of the company's Web traffic comes from outside the United
States.
"Since this entire b-to-b (jargon for business-to-business) market place is
being promoted as we speak, and we have markets where we are making
significant bets in, with our sophisticated technology, (VerticalNet) is a far
better play than putting all your chips in one basket," he says.
Walsh recently took advantage of a trading window to sell 35,000 shares
of the company's stock. Another founder recently sold 20,000 shares.
What about Internet efforts by enterprise resource planner SAP (SAP:
news, msgs) and other giant software makers? They're trying to make
their giant software packages easier to use on the World Wide Web so
that companies can automate basic business functions such as purchase
order management.
"I call it ERP-lite," says Walsh, gently poking fun at the efforts. "They say
they are building communities online. We'll see. They are all much more
partners of ours than competitors."
VerticalNet shares Tuesday morning fell 1 5/8 to 35 5/8. Internet Capital
Group's stock rose 4 7/8, or 5 percent, to 102 3/8.
Getty Images: After about a year of grousing about their languishing
shares, Getty Images Chairman Mark Getty and CEO Jonathan Klein
finally have something to celebrate. Getty Images (GETY: news, msgs)
shares have added about 30 percent of value in the past six weeks. The
Seattle and London-based company, through a series of purchases, is
demonstrating that it can move its library of photographs and other images
onto the World Wide Web. Getty Images, whose two top executives
have told me their positive cash flow puts the company very close to
genuine profitability, on Tuesday said it would buy the Image Bank from
Eastman Kodak Co. (EK: news, msgs) for $183 million in cash. Getty
Images share rose about 9 percent Tuesday morning.
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