The Portal Wars -- What's Going On?
This is for subscribers and anyone who cares to read. On Monday, we saw internet stocks zoom up, some by 20% or more. On Tuesday, down they went, some by almost as much. What happened to the raging bull?
Zapata announced on Monday that it will be entering the portal business with Zap! (see zap.com). The stock doubled in one day. This is very similar to when K-tel announced that it was starting an online CD business. Within a few days, the real leaders of the industry, like CDnow, were heading down because of the huge market caps they had in comparison to K-tel. In both cases, the market realized there were little or no barriers to entry in these markets.
That's not really true though, particularly in the portal business. One company, Netscape, will enjoy advantages that the other search engines can only dream about. Netscape Navigator/Communicator still has a majority leadership position in the browser wars. All those browsers will point to netscape.com with the "Guide" button, if not the "Home" button. Zap!, Lycos, or even the mighty Yahoo! can't compete with that. Yet it doesn't break any antitrust laws.
The closest competitor in the next few years to Netscape's portal will be (you guessed it) Microsoft's portal -- "Start.com". Right now start.com is using Infoseek, just as netscape.com is using Excite. But after a while as Netscape and Microsoft get a handle on the search technology, will Infoseek and Excite be needed? Probably not.
This spells doom for the traditional retail search engines (not including Inktomi -- which has everyone wondering) we have come to know, and they better hope that they go the way of Infoseek and get bought out before it is too late. After huge recent gains, it might be a good idea to ease up on those Yahoo, Excite, Lycos, etc. positions. Netscape on the other hand, is looking more than ripe in the mid-$30's even after the recent gains, and Microsoft, though start.com doesn't look to impact their bottom line by much, is always a solid investment (always? well, at least until we see a 100 p/e!).
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About Virgin Stocks:
Those of you who subscribe know that Virgin Stocks' only recommended internet portal investment is Netscape, which it holds twice over. We intend to continue to be long in the foreseeable future (unless the story changes). Those of you who do not subscribe may have noticed me harping on NSCP recently, and you might consider it my free pick of the month.
The Virgin Portfolio currently holds in the neighborhood of half a dozen non-portal internet-related stocks, and about the same number of aggressive growth companies that don't relate to the internet in any way. Subscribers to Virgin Stocks have trounced the market averages since the newsletter began on May 1, as the Portfolio has returned 32% vs. 2% for the Nasdaq Composite. This is roughly equal to or slightly better than the internet averages recently invented -- and with considerably less risk (though I would never hint that we have been risk-averse).
Whether you are a subscriber or not, happy investing to all. Other opinions welcomed. |
