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Technology Stocks : CheckFree (CKFR)

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To: Ken Palmer who wrote (45)	12/7/1996 5:59:00 PM
From: kolo55	of 8545

Sales will be up big, but watch number of bank customers & subscribers See my previous posting on this thread regarding valuing this stock. techstocks.com The valuation in a growing industry with a captive market like this really should be valued based on potential subscribers; i.e. the number of bank customers who will have the opportunity to sign up for this service. I'd like to use the early days of the cable industry as an example. Analysts began by valuing cable companies based on the number of subscribers. But the number of subscribers were a lagging indicator of company performance!! The number of subscribers wouldn't increase until new systems were built, and new systems lagged agreements with local governments to provide cable service. A few astute investors realized that cable companies should be valued based on the population of the communities where the companies had signed agreements. They priced cable companies based on the market cap of the company divided by the population that lived in their service areas. This was known as price per POP. These investors made a fortune. BTW Mario Gabelli was one of these guys. Right now CheckFree is adding millions of potential customers to their captive market by signing all these banks up. As the customers realize how this service saves them time and money, they will become CheckFree customers. So find out how many customers these banks have and estimate the market penetration electronic banking will attract. For example, the banks CheckFree has already signed probably have more than 40 million customers. If electronic banking brings in 10%, thats 4 million new subscribers; 20% would be 8 million. This is in comparison to the 1.2 million they have now following the ISCO purchase. Finally though, the really really big upside will be the growth in electronic billing. An electonic banking account will generate revenues of $6 per customer account for say 15-20 payments per month. Electronic billing could generate revenues of $3-5 per payment!!! This is by eliminating paper bill prep, mailing costs, and payment processing costs. Therefore the electronic billing market should be 50-100 times as large as electronic payment market. I'm going to continue my investigation into the critical factors discussed above; number of bank customers, sign-up penetration, and the electronic bill payment market. Just trying to learn about this fast enough to make some money off it. Paul

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