Mike,
You posed two good questions which I think can easily be answered with more questions!!!! Although we need to define a couple of key points that I have been hoping we could get a grasp on together. The key points actually involve asking more questions of course. They are:
*Is this B2B space a Godzilla Game?
*If it is not a Godzilla Game, do we buy a basket of stocks?
*How do we segment the portion of traditional companies pre-B2B now that they have entered B2B? Such as Oracle, i2, Siebel, IBM, MSFT, SAP, PSFT, etc... ?
*How do we segment the various forms of B2B into the proper categories?
Mike asked:
Is the B2B industry undervalued?
If you read any report on what is spent today in terms of B2B dollars as opposed to what will be spent one, two, three+ years out from now - you get the sense that tremendous growth exists. Keep in mind, most reports are not talking about the money corporations are going to spend on the software/solutions technology to enable B2B transactions, but how much business in $$$ amounts will be transacted.
This really jumped out at me last night listening to John Chambers matter of fact declamation - combined with excitement in the tone of his voice - when he said how much their Internet transactions have increased year over year. Huge amounts. Cisco, Intel are the two that lead this category, I believe. Dell is certainly in the top few as well. I'm also struck by Geoff Moore's thoughts that the dominant software/solutions technology providers going into the transition to Internet will most likely emerge as the dominant technology providers once they have completed the transition. This transition includes all these alliances that we are seeing.
There are pockets of value and the alliances being formed are real efforts to jockey for position so that the players involved can offer a substantial end-to-end solution for their customers which will save them money - lots of money. Those with the best sales pitch strengths will benefit in their sales encounters. Remember, corporations are drooling with the thoughts of saving millions and millions of dollars by transacting portions of their traditional business encounters via B2B rather than using the more traditional business practices which have been the norm for the past 50+ years.
We know it is a hot sector with hot prospects that make a lot more sense to 'traditional' investors as 'pick and shovel' type investments. This, as opposed to the Godzilla Game of AOL, eBay, Amazon, Yahoo! and the like. Although eBay is a strong case for bringing many to many via the Internet that, IMO, holds the best business model of the four.
As mentioned by the excellent reports posted on this thread, there are a lot of avenues to play this B2B industry. As usual, the money flies in way at the beginning or before 'kick off' to be able to take advantage of the growth that will take place. In that respect, I don't think we can say these stocks are over or undervalued. Oracle, IBM, Siebel, i2, SAP, PSFT, MSFT, etc..., have already been playing this B2B game. It's not as 'new' as we think it is in terms of Internet years. Ha!
....is it possible too many dollars chasing too few companies, resulting in overvalued companies?
Of course this is possible. However, I don't think it is because we are going to see a myriad of yet unknown new companies run into this space and join in the 'fun'. I think most of the players are here and scrambling to get into positions. Hence, the alliances. What's not known at this point is - with all of the hoopla about how much business to business will be transacted in the future over the Internet in dollar terms, what is it going to mean for the companies providing the solutions to corporations, large/medium/small businesses to transact these dollars. How much revenue is this going to bring in for them and how can we apply this to valuations. All we can do is continue to monitor the 10-Q's and 10-K's of each company that we are interested in to see what additional growth it is providing quarter after quarter. I guess that's how we 'do the math'. It's an equation that will take many quarters to solve - or even to attempt to solve.
I have established my little corner of the earth portfolio of B2B plays in a 'basket' of sorts at this point. I feel more comfortable with the big established companies that derive most of their revenues from other sources outside of B2B, yet they are forming strong alliances and moving into B2B via transitions of their in-house product offerings. I'm going with the companies that have the strongest sales forces in hopes they will lead the revenue growth figures for B2B. For me, the smart move is to contribute a small portion of my portfolio to this segment so that I too, as an investor, can benefit from the companies that will help save the world's corporations oodles and oodles of dollars going forward. Then again, many of you know my desire to remain diversified and this strategy is not recommended for all. I just don't know a better way to catch the B2B play at this juncture in time.
BB |
