Gorilla Game Investing in the eWorld Message Board

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Strategies & Market Trends : Gorilla Game Investing in the eWorld

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To: Mike Buckley who wrote (603)	11/15/1999 2:42:00 PM
From: Martin Rasch	Read Replies (1) of 1817

Valuation and B2B: thanks for your deeply appreciated input. Following your advise, I spent some time on the Fools pages i.e. fool.com and some related links. Even for someone who has already spent some time with investing and DD it was very informative and given that I have heard most of the stuff already it was a vulnerable repeat exercise. Highly recommended to everyone who is not a full time pro - unlike UF .-) But, trying to apply the rules to your initial questions, Is the B2B industry undervalued? If so, is it possible that there are too many dollars chasing too few companies, resulting in overvalued companies? It became clear to me that things are more complex than they originally appeared. The more I dug the more questions arose, finally leading to the ultimate one: Is there a so called B2B industry? After studying the two most popular representatives, ARBA and CMRC I doubt it. Here is why: These two companies have impressive growth rates based on complete different business models ARBA mainly sells software: Ariba ORMS ariba.com CMRC is offering a virtual marketplace (Marketsite.Net) The fee for participating in MarketSite is transaction based. They charge a minimum fee to their suppliers every time they receive a purchase order from their participating customer(s). Fees range from $.25 to $2.00 and are based on volume Frankly, I see CMRC more in e-Commerce than in B2B. By further examine this terrain I had a stopover at ITWO. This company employs about 10 times the staff of the formerly mentioned and generates about 10 times their revenues but Mr. Market does not grant her a adequate market cap. Why the hell that? What can the other guys do what i2 can't? I really don't know - they offer a integrated B2B system within their application and have installed a virtual marketplace as well tradematrix.com They have more suppliers than the others have and they are sitting on a broader base of current customers. But also i2 has it's problem because their "value chain-application" is in jeopardy since the big ERPs are going to integrate it to their solutions. Despite of this I see no proprietary nor high switching costs in the B2B area. There is no reason why one could not use different marketplaces simultaneously. As a conclusion I would say that the tornado-like demand for B2B solutions will make the strong ERPs even stronger. Should be a reason to load up more SEBL :-) But for those who want to ride the hype find enclosed excerpt of the 10Ks. Since CMRC comes from a lower base it will be easier for her to maintain a outstanding growth rate for a while and surprise the street in a positive way. Long term, the current market cap of both is not reasonable IMO. ITWO should be the safer play (though I doubt that safe is the appropriate term in this context) ARBA CMRC ITWO Revenues (mrq 4) 68.564 41.452 585.184 sales growth (mrq vs qtr. 1 yr. ago) 266% 1385% 55% average quarterly growth (last 4 qtrs) 39% 110% 12% Market Cap 8.933.660 7.378.440 5.742.740 Price/Sales (mrq 4) 130 178 10 Employees 221 244 2244 Revenues / Employee (mrq * 4) 310 170 261 Other Companies to observe SAP SAP enterprise resource planing PSFT PeopleSoft enterprise resource planing ORCL Oracle enterprise resource planing BAANF Baan enterprise resource planing SEBL Siebel enterprise resource planing MANU Manugistics supply chain LGTY Logility supply chain BVSN BroadVision e-Commerce OMKT Open Market e-Commerce SILK Silknet e-Commerce It would be great if someone picks up this stick and throws it back with some commentary and/or proves me wrong with my conclusions. Having a great time being here Martin

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