Netscape - To Yahoo or not?
Netscape stock price seems to be linked, at least for the time being, to that of Yahoo, Excite and other similar search engine stocks. This is probably due to the illusion that Netscape now wants to imitate the success of these companies by capitalizing on the huge volume of traffic generated by its popular Net Center. This is probably true, at least for the short term. Now that they are giving away the browser, they are partly dependent on the advertising income from their Net Center division.
However, Wall Street is ignoring one crucial difference between Netscape and the Yahoos and Excites. Internet commerce. With the acquisition of Actra and more recently Kiva Software, Netscape is very well positioned to dominate the enterprise software applications market.
So while the Yahoos and Excites have doubled or tripled in a short time thanks to the momentum players on Wall Street, their market capitalization is definitely not justified given their revenues, if any, and their limited focus. Advertising revenues alone cannot lead them far enough; investors are betting they can maintain their lead over other companies in the wild scramble to gain access and market share of new growth avenues on the internet. While it is still uncertain if they will succeed, Netscape is right where the action is expected to be. The enterprise market is expected to grow exponentially in the next few months as internet commerce explodes.
Netscape is, at this moment, grossly undervalued. This reflects the bearish sentiment investors possess following a sharp decline in its value. This should be a temporary situation. Their earnings for this quarter should give a preview of what to expect from the company in the second half of the year. Investors are expected to pay close attention on their enterprise software applications revenue. If there are indications that revenues in that segment are up, expect the stock to rally strongly.
I, for one, would rather not see Netscape being bought over at this stage. This will only short-circuit a tremendous upside potential this company has in the long term. |
