Swedish Net firms' stock soars, show
promise
By Reuters
Special to CNET News.com
December 2, 1999, 11:20 a.m. PT
STOCKHOLM--Shares in Swedish Internet consulting companies have soared this
year, and analysts say they still have potential as their valuations have not yet
caught up with U.S. counterparts.
Sweden has one of the highest Internet usage levels in the world, and consultancies such
as Framfab, Icon Medialab and Information Highway ride that wave by offering companies
strategic solutions for the Internet, intranets and e-commerce.
Investor enthusiasm for the Internet has propelled these companies' stock prices to clock
meteoric rises this year. Icon shares have risen to around 227 points from about 29 at the
start of the year, taking into account a five-for-one share split yesterday.
Rival Framfab has rocketed to 720 from 150 after its initial
public offering in June, while Information Highway is up at
640 points from around 50 in January.
But even after these spectacular gains, Swedish Internet
consultants are still cheaper than American counterparts
such as Razorfish, U.S. Web and Proxicom.
"Compared to U.S. competitors, Swedish Internet firms
trade at about half the price," said one Swedish analyst
who declined to be named. "This gap is too wide...it is
narrowing every day, but we are not saying it should close
completely."
Internet companies are often valued in terms of sales
because firms in this sector rarely book substantial profits
in the first few years of existence, making profit based
valuations impossible.
Brian Skiba, an analyst at Lehman Brothers in London, said shares in U.S Internet
consultancies are trading at 10 to 12 times their projected 2000 sales per share while
Swedish companies are trading at between six and eight times sales.
"Some gap is needed, but I would see it narrowing slightly either through acquisitions or
through Swedish companies listing in the United States," Skiba said.
On Nov. 26, after Icon acquired NY Nicholson as a platform for U.S. expansion, its share
price soared from the previous close of 630 points to 770.
Icon, which started three years ago with three people in a former garment factory, now
employs some 830 staff in 13 countries and is still looking to expand.
The fact that some Swedish Internet companies such as Information Highway and Framfab
are actually recording profits is encouraging, analysts said.
"It is a very good sign," one analyst said. "One thing we have seen is that the market is
focusing on profitability. The sharpest price increases we have seen are in the companies
that have shown the strongest profitability improvements."
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