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Non-Tech : E*Trade (NYSE:ET)

ET 16.44

+1.0%

Nov 26 3:59 PM EST

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To: Spytrdr who wrote (10172)	12/25/1999 6:05:00 PM
From: Kumar Nathan	Read Replies (3) of 13953

The Future of OLBs : A random thoughts. Hi Folks, Lets think about the future of OLBs. Currently OLB market is very much matured, saturated & dominated by the existing players. The new entrants will be purely the guys who want to convert/add brick into/to click. Thats it. THe existing guys in this space doesnt want to be known as a pure OLBs. They would like to diversify and to add other features into their business plan. Thats the reason why EGRP went after TBFC. Similarly many banks are diversifying. When we look deep into TBFC & EGRP merger I categorically said that this merger is going to be accretive and not dilutive. My reasonings and numbers are as follows. 1.Last Qtr TBFC earning results were as follows. Last Qtr. .06c (est. 0.04c up by 50%) Mgmt were very happy with the outcome and their account acquistion cost was comparitively very low. Mainly due to deals with EGRP. This qtr it will be much better. Street is expecting 0.06c. My expectation is that it will be at lease 0.08c. But their qtr ending is in Jan. For the purpose of consolidation we can assume that the last 2 months earning should be at least 0.05 -0.06c.. This translated to EGRPs earning will be around .06/1.05 will be almost 0.06c for the two months ending December 31, 1999. EGRP's last qtr income was a loss of -0.10c.(est. -0.12c. Beat the street by 20%). During the conf. call they said that this current qtr will be much better than the previous qtr. But at that time of conf. call no body expected the volume to be as high as this. NAZ Continuously seen more than 1Billion in volume for most part of Nov & Dec. Similarly NYSE touched 1Billion mark at least 30% of those days. Therefore the revenue from incremental revenue has very little fixed overhead associated with it. It means that our revenue will be at least 50% to 60% more than last year. I am giving this # based on the fact that the incremental revenue only absorbs a fraction of incremental cost. The net profit hits directly to the bottomline. Therefore we hope the earnings for this quarter will be much much higher. Based on Lastqtr total account we should be performing atleast -0.10c based on last qtr volume. When we consider blockbuster NAS &NYSE volume, our loss should be at least -0.04c or it should be -0.02. (Remember increased revenue is purely gravy). The other aspect we need to add is the increase in revenue and profitability due to increase in # of accounts. Assuming you add another 450K or so new accounts. These folks should be adding another .03c or so to our profitability. Therefore we will either breakeven or show a token profit number for this qtr. Remember street is estimating a loss of -0.18c for this qtr. This number was never revised for more than 60 days. Nobody anticipated this kind of smoking volume. Therefore street is yet to revise their numbers. If we report an earning of 0.02c profit instead of -0.18c coupled with the blockbuster account growth and the approval of Telebank deals. I am sure we will see some fireworks in the market. On a consolidated basis if we report telebank and Etrade together (for the purpose of our math) we will be reporting an earnings of (.02c of EGRP & .06c ofT TBFC =.08c totally). Now is the time for people to accumulate this stock to the max. I clearly see this happening. TBFC symbolic voting is only 2 days away. After Tuesdays approval of TBFC shareholders, both the companies will begin the merging of both their websites. Since EGRP is announcing their earnings on Jan 11th. Smart people would have done their tax selling much before Dec 11th so that they can be able to participate in the new run of this stock after their Q1 earnings. We also need to understand that Etrade hasnt unleashed any new news for the past 3-4 months. The managemetn is holding all their cards closer to their chest and waiting for this deal to get complet. All in All, I am hopeful that we will be seeing this stock galloping in the next few weeks. If not we need to stuff some snuff in this dead horse so that it can wakeup with some induced vigor and energy. I hope I make some sense. Regards Kumar

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