SECTOR: E-COMMERCE ENABLERS
APNT @ 56 3/8
CYSV @ 47
SAPE @ 111
SCNT @ 105
VIAN @ 89 1/4
E-commerce "enablers" soar on strong orders
By Dick Satran
SAN FRANCISCO, Oct 22 (Reuters) - Even as Y2K concerns grounded mainstream technology stocks this week, another high-tech group -- builders of e-commerce sites -- kept flying higher.
The companies, already hot because they were part of the Internet sector, got an additional boost this week when their fiscal results showed them moving into profitability or coming very close. That sets them apart from the first waves of Web start-ups who have struggled with marketing costs and been unable to break into black ink.
But for companies providing technology and consulting services, these are the best of times. And the marketing costs that have caused others to stumble probably won't be a big factor, analysts said.
"You have companies blowing away (earnings) estimates," said analyst Richard Leggett of Friedman Billings Ramsey. "The backdrop to this is that there is not an executive in the world today who is not aggressively moving his or her business to the Internet."
But even if corporate America wants to get on the Internet, there is a limited supply of companies who can get them there. Five years of fast-paced start-up activity has claimed some of the best talent in the industry already, and those that have it are in a strong position.
That helped Viant Corp (NASDAQ: VIAN), which only recently went public, move into the black this week, as it reported profit of 12 cents a share, or $1.7 million. Its revenue soared 71 percent to $18.8 million from the prior three months, as it was able to boost its consulting fees to reflect extremely strong demand in the marketplace.
"That's a very steep (revenue) gain -- and there were a lot of things happening in that quarter, so it's not a trajectory that we will be able to maintain indefinitely," said Viant Chief Financial Officer Dwayne Nesmith.
Nonetheless, he sees strong double-digit quarter-on-quarter growth in the foreseeable future, with about 80 percent of the company's Internet services work coming from the largest 1000 global companies. Other e-commerce companies are reporting similar outlooks.
The e-commerce services companies became particularly attractive this week because tech-oriented investors were looking for stocks that would have little or no exposure to the millennium "lockdown."
The new Y2K scare stemmed from an IBM Corp. (NYSE: IBM) disclosure that its results were hurt by a slowing of high-tech projects due to the millennium changeover. The worries surround the IBM mainframe environment, where some old computer coding might not recognize the "00" of the new year.
But the e-commerce sector is far less concerned over the millennium bug, since Internet-related hardware and software mostly runs on post-mainframe era computers.
"These Internet companies haven't been around long enough for the Y2K bug to be a concern -- these systems were being set up long after Y2K became an issue," said David Levin, president/New York of AppNet Inc. (NASDAQ: APNT). "We are the ones that can fix Y2K problems -- we're not the ones that created them."
AppNet, which reports results next week, is a full-service company that sets up large-scale Internet operations, handling everything from building Web storefronts to connecting Internet orders to behind-the-firewall mainframe computers.
Appnet was among a number of companies trading higher Friday, gaining $13.35 to stand at $56.35. Others, most of whom already reported sharply stronger results this week, were up strongly as well on Friday.
Viant soared $18.75 to $89.25, Scient Corp. (NASDAQ: SCNT) climbed $5.625 to $105.125, Sapient Corp. (NASDAQ: SAPE) jumped $9.75 to $111.125, and Cysive Inc. (NASDAQ: CYSV) advanced $8.50 to $47. All were trading at or near all-time highs.
The stocks have proved strong performers since April when the focus of Internet stock mania shifted from consumer-oriented sites like Amazon Inc. (NASDAQ: AMZN) and E*Trade Group Inc. (NASDAQ: EGRP) or even Netscape founder Jim Clark's more business-to-business oriented healthcare site, Healtheon Corp. (NASDAQ: HLTH).
Those shares have fallen dramatically from their highs because there is a hyper-competitive environment for anyone trying to establish an Internet destination. But the Internet consulting firms thrives on the clutter, because it brings new business, and they don't need the huge marketing outlays to attract customers.
"Who is the glue of this (e-commerce) business? It's the solutions firms, they are the gatekeepers with the technical and creative talent to build and manage e-commerce," said Leggett. "As long as they can execute and keep their talent on board, they'll keep getting more and more business."
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