I don't think that you are missing anything. FREE has been over valued since the day they came out. Too much competition and an unproven business model. FREE should probably be trading in line with NZRO.
yahoo.cnet.com
Freeserve shares settle after free fall
By Dawn Kawamoto
Staff Writer, CNET News.com
June 27, 2000, 2:00 p.m. PT
update Shares of British Internet service provider Freeserve rebounded slightly after its multibillion-dollar merger with
Germany's T-Online unraveled at the last minute and two analysts downgraded the stock.
At the close of regular trading, Freeserve was down $9.81, or 17 percent, to $49.19 after slipping as low as $47. Since March, shares
have plunged more than $150.
Last May, Dixons Group, a British electronics retailer and a major Freeserve shareholder, said it was
considering selling its stake in Freeserve. The company and Dixons then talked with several potential
suitors, including T-Online, about a possible deal.
But yesterday, Freeserve issued a statement saying that no sale is imminent.
"Whilst certain discussions continue, Freeserve does not expect that this process will lead in the near
future to a bid for the whole of Freeserve," said the company, which offers free Internet access.
As a result, Peter Misek, an analyst with Chase H&Q, downgraded the stock to "market perform" from
"buy." Lehman Brothers also downgraded the shares to "outperform" from "buy."
"Everyone expected them to make a merger announcement this week, but something happened over the
weekend," Misek said. "We downgraded the stock because the company's shell-shocked, and it will take
time to find another bidder. The banks had not organized a backup bidder."
He noted that although France Telecom may eventually emerge as a suitor, Freeserve's comments were "not encouraging."
Freeserve, which had a market cap of $6.8 billion prior to its announcement, was expected to fetch $10 billion from T-Online, Misek
said.
Consolidation in the Internet service provider (ISP) and Internet media industries is expected to sweep through Europe through the rest
of this year, as the region changes its telephone billing system and as international advertisers seek larger outlets.
With Europe operating under a unified currency, companies may look to advertise on Web sites that serve the whole region, rather
than sites that cover just Germany, France or the United Kingdom, Misek said. He added that consolidation also gradually
extinguishes costs such as for hosting Web sites and for setting up infrastructure for a larger audience.
The shift in the way phone calls are billed is another area of concern for free ISPs in Europe. Besides advertising and e-commerce,
free ISPs derive revenues by taking a cut of the per-minute charges levied by phone companies for Net access. But phone companies
are moving toward a flat-rate monthly billing system similar to that in the United States for local calls.
Freeserve receives about 50 percent of its revenues from these per-minute charges, a ratio that is expected to decline as customers
move to flat-rate pricing. |
