Response to the suggestion that NETP will be eaten up by EPNY and Macromedia (I am gnu222 on Yahoo):
post.messages.yahoo.com
y2ktoppick
by: gnu222 4/30/00 1:15 pm
Msg: 13983 of 13983
Until its very recent merger with Octane, EPNY was a lesser company than NETP in many respects:
1. Less cash
2. Less employees
3. Greater losses
4. Less customers
5. Less analysts covering the stock
The merger has allowed it to leapfrog in all categories except 3 and 5.
The biggest difference before the recent correction has been the market capitalisation or share price. Even though EPNY's price to revenues was 4x or 5x higher than NETP - making it over-priced. However, it was the inflated share price which allowed it to acquire Octane and thereby move up a giant step in size. If you remember, EPNY's purchase price for Octane was considered too high at the time and contributed to a depression in the sector's stock prices. The merger gave a dramatic boost to the recent combined quarterly earnings of the two companies, but some of the concerns raised about the price of the merger may come home to roost later.
NETP also had an acquisition in 1Q - of KD1. Since KD1 was a pre-IPO company, the acquisition and integration of the company happened very quickly, in less than two months, and NETP paid in shares and much less a pro-rata price than EPNY paid for Octane.
NETP seeks out acquisitions and has hired an ex-Intel executive as an acquisition specialist. While its own deflated share price is a barrier - it has cash to add to shares to make smaller, strategic acquisitions. It is a general rule that small, profit-making acquisitions work far better than the larger type. They cost less, can be assimilated more easily.
NETP has always been a potential takeover target for larger companies wishing to acquire leading edge technology in the sector. But as it steadily expands its range of products and its customer base and as it enters new markets it is growing in financial strength and market position. Competitors - large and small - will be unable to stop it - given its technolgical lead and mindshare in its niche - and if it is to be taken over, it will be for a price far in excess of its current share price. A merger of equals is more likely, as is a major equity investment by a mega company such as Microsoft. NETP can compete very well with EPNY and may one day leapfrog it in size.
Macromedia is on an entirely different and much larger scale. But it competes with NETP in only one relatively minor product line - Right Minds. In previous quarters NETP reported that they were not seeing Right Minds in competitive situations. In the latest quarter they acknowledged that Right Minds had been making some wins - but it is not a product which is strictly comparable with NETP's. Right Minds uses a "rules based" system which is rigid and limited. NETP uses collaborative filtering which is scalable intelligent, grows in intelligence with each use, and is very fast. Rather than Right Minds competing with NETP for real time recommendations, NETP will produce its own rules based system to attack those market segments presently targetted by Right Minds.
It is much easier to step down from collobarative filtering to rules based so there is a low barrier to NETP entering that segment. But it is difficult to step up in the opposite direction, especially since NETP has applied for 17 patents in the field. NETP has no genuine competition for what it does best - real time personalisation and it uses this leadership of its niche to expand its offerings to compete with others in their areas of expertise.
If NETP did nothing else but real time personalisation married to the analytic capacity arising from its KD1 products, it would have a universe of potential customers including those companies using Macromediea, EPNY, BVSN, VIGN and all the others for other aspects of their customer relations software. NETP would continue to grow at a fast pace. But NETP is progressively expanding its offerings to compete in other sectors of the market. |
