Internet Companies' 3rd-Qtr Seen Improving: Outlook
(Update1)
Bloomberg News
September 24, 1999, 12:16 p.m. PT
Internet Companies' 3rd-Qtr Seen Improving: Outlook (Update1)
(Updates with details on AOL and CompuServe in 14th and 18th
paragraphs. Updates share values in 16th and 21st paragraphs.)
New York, Sept. 24 (Bloomberg) -- BigStar Entertainment
Inc., like most Internet companies, wasn't so big this summer as
more potential customers went on vacation, spending less time at
their computers and purchasing fewer videotapes and discs.
BigStar.com Web site sales slumped in July and August. Its
shares plunged 50 percent, dragging the value of Chairman David
Friedensohn's holdings from $10.7 million to $5.36 million. Only
in September did BigStar's traffic surge 50 percent from last
month as users returned to their PC screens.
Many online merchants are glad summer is over and shoppers
are back. E-commerce companies from BigStar to Yahoo! Inc. are
expected to post third-quarter revenue gains because of a strong
September, which could boost earnings at profitable Internet
companies and pare losses at others.
''Seasonality had more impact than people imagined,''
PaineWebber Internet industry analyst Jim Preissler said.
Internet stocks continued a decline in the third quarter on
concern about losses and slower growth rates. Most Internet
companies such as Amazon.com Inc., the largest online retailer,
will continue to report wider losses as they spend more to
attract new customers.
The Bloomberg U.S. Internet Index has dropped 14 percent
since June 30, and 35 percent since its high of 228.87 on April
13.
Crucial Month
Traffic to Internet sites was expected to pick up in
September and remain strong throughout the rest of the year as
students return to school and people return from vacations.
''A year ago, it was still very early,'' said PaineWebber's
Preissler. ''People at this point are using (the Internet) as
part of their day-to-day lives.''
The third-quarter results may indicate whether the industry
can continue to show rapid customer growth, and could portend a
strong holiday e-commerce season, analysts said.
Fast Internet connections also could boost usage for content
Web sites such as Sportsline USA Inc. and Time Warner Inc.'s
CNN.com because it's quicker to watch video or audio clips on
such connections, analysts said.
''We're going to have a good quarter across the sector.
We're sort of a barometer for traffic,'' said David Peterschmidt,
chairman and chief executive of Inktomi Corp., which sells an
Internet search engine and software that helps speed the movement
of data through computer networks.
Traffic, or the number of people who visit a Web site,
started to increase before Labor Day, Peterschmidt said.
America Online
The shares of No. 1 Internet service America Online Inc.,
one of the few profitable Internet companies, have been hit by
concern about competition from free Internet service providers
such as Netzero Inc.
AOL said earlier this week that it's on track to gain more
subscribers in its fiscal first quarter ending Sept. 30 than the
951,000 it added in the year-earlier period.
''AOL has to prove they can continue to maintain subscriber
growth in the face of free pricing,'' said PaineWebber's
Preissler, who expects $1.4 billion in revenue and a profit of 13
cents a share.
Dulles, Virginia-based America Online, whose shares have
dropped 13 percent since June 30, has seen its European
subscriber growth hampered by free Internet services in the U.K.
Last month, AOL started its own free U.K. service called Netscape
Online, and is offering personal-computer rebates in the U.S. for
consumers who subscribe to its CompuServe service.
''Against all odds, they'll have a great quarter,'' said
Youssef Squali, a Ladenburg Thalmann & Co. analyst who has a
''strong buy'' rating on the stock. ''Their premium brand, AOL,
continues to attract first-time users and the free ISP model is
not really having the anticipated impact people thought it
would.''
CompuServe
CompuServe has added more than 300,000 subscribers this
quarter, boosted rebates it began offering at the start of the
quarter to people who agree to use the service for at least three
years.
''It will be the fastest growth CompuServe has shown since
AOL bought it'' in early 1998, Squali said.
''From every indication, e-commerce is going to be stronger
than before,'' said Ned Brines, an analyst at Roger Engemann &
Associates, which owned 5.3 million shares of America Online as
of June. ''The third quarter will be better than expected'' for
companies such as AOL.
Yahoo, the No. 1 Internet search directory, has seen its
stock tumble, though less than other Web-based companies. Its
shares have dropped 3.6 percent since June 30.
''Yahoo has continued to do well,'' said Preissler, who
expects $139 million in revenue and a profit, excluding charges,
of 10 cents a share. ''I don't think they'll stumble on financial
fronts at all.''
Santa Clara, California-based Yahoo benefits from being the
leader in its category, analysts said. Companies are willing to
pay more to reach Yahoo's audience, since it's one of the biggest
on the Web.
''Premium sites (such as Yahoo) are able to command higher''
advertising rates, Brines said.
Company 3nd-Qtr Year-Ago Number of
Estimate EPS Analysts
Amazon.com $(0.28) $(0.08) 20
America Online* 0.13 0.05 35
CMGI# (0.17) 0.32 6
Cnet Inc. (0.33) (0.03) 12
Doubleclick Inc. (0.14) (0.14) 13
EarthLink Network (0.34) (0.04) 7
eBay 0.01 0.02 16
Excite At Home (0.01) (0.04) 17
Inktomi% (0.09) (0.16) 13
Infoseek% (0.41) (0.08) 11
Lycos^ 0.01 (0.03) 22
MindSpring 0.03 0.08 10
Network Solutions 0.18 0.09 9
Yahoo 0.09 0.05 27
*--fiscal first quarter ending September #--fiscal fourth quarter
ending July %--fiscal fourth quarter ending September ^^--fiscal
first quarter ending October. Estimates provided by First Call
Corp. |
