From ICGE thread:
Talk : Web/Info : Internet Capital Group LLC - ( Nasdaq- ICGE )
To: Susan G (759 )
From: prolific Tuesday, Nov 9 1999 8:40AM ET
Reply # of 763
The battle for B2B domination
By Peter D. Henig
Redherring.com
November 9, 1999
Just how great are the new, highly touted business-to-business (B2B) electronic commerce stocks? Judging from current rallies in the few issues fitting the bill, they're pretty fantastic.
Pondering Microsoft's breakup valuation
Webvan stock stalls after quick start
Cobalt burns hotter than Red Hat
Internet Capital Group (Nasdaq: ICGE), Ariba Technologies (Nasdaq: ARBA), Commerce One (Nasdaq: CMRC), Verticalnet (Nasdaq: VERT), Safeguard Scientifics (Nasdaq: SFE), and especially the newly public Purchasepro.com (Nasdaq: PPRO) have posted rallies so strong that other tech winners, such as Lucent Technologies (NYSE: LU), Cisco Systems (Nasdaq: CSCO), and America Online (NYSE: AOL), are being left in the dust.
These stocks have climbed so far off the charts, investors appears to have just discovered them. For example, in just five trading sessions, ICG climbed $50, or 42 percent. In three days, Purchasepro.com soared $24, or 55 percent.
B2B stocks had been late to go public, but no more.
The B2B revolution creeps into the metals industry.
Venture investors raise the stakes in B2B product exchanges.
Safeguard Scientifics backs beef B2B.
REASONABLE IRRATIONALITY
Why the rally, and why now? Without the typical seasonal boost that business-to-consumer (B2C) stocks enjoy heading into the fourth-quarter shopping season, these recent B2B growth rates are puzzling.
One factor is the Fed. Federal Reserve Chairman Alan Greenspan once again hit the brakes on raising interest rates, unleashing the Nasdaq to finally rally past the 3,000 mark. B2B companies are leading the charge, looking like they'll dwarf the Internet stars we've already seen.
By the year 2003, $1.3 trillion's worth of business transactions will take place online, a 30-fold increase from the $43 billion in online sales transacted last year and 10 times the projected market for online consumer sales, according to Jupiter Communications (Nasdaq: JPTR). As we've seen happen with other nascent businesses trading in today's public markets, investors are quick to jump on any opportunity perceived as largely undiscovered or undervalued, even if those companies already enjoy multibillion-dollar valuations.
When markets rally, they often are reacting to good news combined with a confluence of strong fundamental events. In the B2B space, where a few well-known brand names jockey for position, partnerships and "co”petition" are driving these stocks higher. For example, ICG this week announced plans to expand into the European market by opening a London office. Investors applauded the move, which will let ICG apply its investment and incubator model to a huge incipient market.
In addition, ICG made a $50 million investment in eMerge Interactive, a B2B play in the cattle industry. The cattle industry? It's an estimated $54 billion market opportunity in the U.S. Obviously, there's real money in beef, especially given BancBoston Robertson Stephens Internet analyst Eric Upin's report, in which he wrote, "ICG is still our favorite name in the B2B space."
Another announcement validating the B2B market came from Verticalnet, which disclosed a revenue-sharing partnership with Purchasepro.com that broadens its partnering strategy with e-commerce market makers and infrastructure players. Verticalnet plans to integrate Purchasepro.com's procurement solution into its FoodServiceCentral and E-Hospitality sites, expanding Verticalnet's audience in the hospitality niche.
A third boost for pure B2B came from Commerce One and General Motors (NYSE: GM), which announced plans to launch a B2B marketplace for GM's dealers and suppliers, forming a $90 billion-a-year supply chain.
That news followed on the heels of a newly formed partnership between Oracle (Nasdaq: ORCL) and Ford (NYSE: F), under which Ford will move its $80 billion in annual purchasing to a jointly developed site, which ultimately will conduct online transactions related to Ford's extended supply chain.
HOLD YOUR NOSE AND JUMP
Taken together, these announcements are huge confidence-builders for B2B investors, who had been strangely hesitant in light of last year's B2C stock-buying frenzy.
Depending on who you talk to, B2B is either a fad or a fundamental shift in how business is conducted that is worthy of valuations ten times those of B2C issues. Eric Greenberg, CEO of Web services firm Scient (Nasdaq: SCNT), says, "People and companies that build businesses for the new economy are very good investments." Scient epitomizes this rule, rallying from $80 a share three weeks ago to a high of $145 last week. Scient closed Monday at $119.19.
Ryan Jacob, president of Jacob Asset Management, is skeptical, having witnessed many wild swings by Internet stocks. "It's the latest fad," he says. "Last year it was e-commerce, this year it's B2B. It's something that catches investors' eyes and gets blown out of proportion. Every stock gets priced like a winner."
They may be overheated, but B2B stocks give few signs of slowing down. Even the often-overlooked Safeguard Scientifics recently picked up steam, soaring from $85 on Monday to $103.50 on Friday, ahead of an important analyst meeting and amid a sudden realization by investors that the 14 percent stake Safeguard acquired in ICG represents a brilliant move at current valuations. ICG is currently worth more than $20 billion, adding nicely to Safeguard's other investments in 12 public and 21 private Internet-related firms.
There's plenty of room for more B2B public offerings in the future. At the moment, no B2B play in the market is a dominant franchise. Fad or no fad, the current rallies provide a big indication that B2B is this year's hot stock ticket. Don't expect it to fade away. |
