Oh, I don't really see the harm-webush
by: mrtanner69 (32/M/Moving to NC)
Long-Term Sentiment: Strong Buy 04/24/02 01:15 pm
Msg: 379879 of 380954
Rob,
Thanks for the e-mail and insightful questions. I will try to address each
one individually:
1. Carriers distancing themselves - while I believe InfoSpace provides some
of the best content aggregation, integration, and personalization software,
several carriers are mistrusting of management. In addition, carriers (while
they are capex constrained) are testing several applications on an ASP
basis, with the goal of bringing the large profitable ones in-house. Similar
to voicemail and SMS, which have supported billion dollar revenue
opportunities. While there will always be a need for integrated content,
content delivery, and less-critical applications on an ASP basis, the big
ones will be brought in house. To answer more directly, carriers that have
distanced themselve include several Vodafone subsidiaries (which is mostly
known) and VoiceStream (part of DT now). Even Verizon has partnered with
TSYS for messaging and moved the InfoSpace platform to the last slot on its
menu from the first. In addition, revenue growth in this segment has been
illusive for the past four quarters. Thus you have to ask yourself, if the
penetration of data apps is growing why is InfoSpace's revenue in this
segment flat. Lastly, six month ago InfoSpace's positioned itself as the
best enabler of 2-way SMS to Wall Street. Look who received the business
(VeriSign via Illuminet and InfoMatch). It appears InfoSpace is just
providing additional functionality to maintain pricing.
2. The worth of the underlying platform - The substitution effect comes into
play here, how difficult is it to create a private-label portal. Sprint,
Vodafone, mm02, DoCoMo, KDDI, DT and several other operators have developed
their own. Others have teamed up with Microsoft or Yahoo! I agree that there
is a need for portal infrastructure and personalization technology such as a
user manager (see Sprint's deal with Zkey).
3. I agree that the company's payments and promotions platform is solid and
has already shown solid growth in the merchant business. However, on the
wireless side, m-commerce is still a ways away. If we are just getting use
to using simple applications such as SMS today, the adoption of m-commerce
is still a ways off.
4. InfoSpace powers mMode - InfoSpace does power the core portal and
shopping segments of mMode. However, as with i-Mode, mMode will break down
the "walled garden" (as PocketNet was) that InfoSpace needs to be of most
value. Therefore, users will be able to leave the core platform with more
ease.
5. GPRS and 1X Networks will drive growth - Agreed, it already is showing
signs as indicated in Openwave's conference call. Also, new handsets and
programmable logic such as BREW and J2ME will help out. As for true 3G, not
much will happen outside of Asis for the next few years.
6. Management credibility has always been the issue and not only with Wall
Street but also with partners and customers. If they can get that back on
track, we would be more bullish, especially at this valuation (tangible book
is $1.18 and cash & investments is $1.06 per share). However, the company
continues to overpromise. Where are the rest of the four carriers to be
announced and what happened to dominating 2-way SMS? These are questions
that need to be answered. At these levels downside is limited and if the
company can provide positive growth in wireless in addition to merchant
services, you may see us get more positive. |
