VerticalNet Deal Draws Divergent
Views
By Joe Bousquin
Senior Writer
11/8/00 5:22 PM ET
Forget about Al Gore and George W. Bush. Views on
VerticalNet (VERT:Nasdaq - news) are split as well.
Analysts came out with mixed opinions on VerticalNet's
decision to buy online credit company
SierraCities.com (BTOB:Nasdaq - news) for about
$133 million in VerticalNet stock. Investors, however,
saw only one side Wednesday. In the midst of a broad
technology selloff Wednesday, VerticalNet shares fell
$3.44, or 12%, to $24.38.
VerticalNet, which has made at least 20 acquisitions in
the last two years, plans to use SierraCities.com to
allow companies that use its network of Web sites to
check the credit quality of prospective customers.
But Tim Klein, an analyst at U.S. Bancorp Piper
Jaffray, downgraded VerticalNet Wednesday to buy
from strong buy, citing new risks at the company after
the acquisition. The "acquisition raises [a] number of
concerns topped by added execution risk," Klein wrote
in his note. "As we've indicated previously, VerticalNet
has significant execution challenges in the areas of
e-commerce sales, service and traffic generation. While
it can be argued that the proposed acquisition will help
in some of these areas, we believe that such a benefit
does not exist in the near term." (Piper hasn't done
recent underwriting for the company.)
But at Gerard Klauer Mattison, analyst Alan
Weichelbaum, who rates the stock a buy, saw the
acquisition in a more positive light.
The "acquisition broadens VERT's product offering,"
wrote Weichelbaum, who added that the deal carries
strategic benefits. (Gerard Klauer hasn't done recent
underwriting for the company.)
For one thing, it will allow VerticalNet to offer credit
scoring, which involves computer scoring of a
customer's credit worthiness. "The absence of online
credit scoring has been an impediment to B2B
transactions," Weichelbaum wrote. For another, the deal
gives VerticalNet additional services to cross-sell to
customers and marketplaces.
It's not the first time analysts have had divided views on
VerticalNet. Earlier this year, the stock created
controversy among the analysts who follow it. But on
Wednesday, investors were buying only one point of
view. |
