From Yahoo! post by: jeff_trimm 1/22/00 12:18 pm
Msg: 12007 of 12008
This phenomina [referencing a previous post explaining that an increase in float is not always a bad thing in that there are many funds out there that can only invest in companies with a high degree of liquidity -- mo] is as good as anything I've read which helps explain the seemingly counter-intuitive jump in ISLD's stock price when the secondary offering was announced.
As for earnings... I have no idea whether they will be good or bad vs. estimates. However, I personally am not overly concerned about earnings at this point. Everyone must realize that both ISLD and AKAM have to spend big bucks to lay the foundation for their business.
Put yourself in Ruann's shoes. If you were CEO of this startup, attempting to enter/create a new multi-billion dollar market, would you penny-pinch to make early earnings look good, or would you be more concerned about spending the money on the strategic investments needed to be a leader in this new market? I think the answer is pretty obvious.
This is one of the situations where you can genuinely forgive losses and a runup in debt the first few years in. There is a lot of capital investment that needs to be done to create the networks, data-centers, and POP's needed to hit the critical-mass required to make and sustain substantial profits. If you don't make the moves needed early to be at the forefront of this market, your earnings 3-5 years down the line will certainly regret it.
ISLD is spending money, but IMHO they are spending it on all the right things to achieve and maintain a profitable revenue stream in the future. They are concentrating on (a) building out their network, and (b) providing an expanded suite of products which taken together, provide more value than simply hosting e-commerce sites.
Concerning their capital spent on building out their network-- There is a point where you can drive down costs through economies of scale where there will be no way that a business can provide the same quality-of-service with their e-commerce site than ISLD can provide at a lower cost. That's when ISLD wins. I also love ISLD's strong international focus on their network buildout. I think this will be a KEY differentiator in the future.
So, there will be a point when the accountants at all the .com's consider it a no-brainer from a cost standpoint to outsource e-commerce hosting services to companies like ISLD. If the solution makes sense from a technology standpoint, a product-features standpoint, AND you can get the bean-counters as an advocate, then the revenues will start piling in.
Of course, it takes money to get there.
So, the market will do its thing based on what the earnings will be Monday, but in either case, I think they are strategically less important than what products and infrastructure ISLD is putting together right here and now |
