Glenn:
Interesting to see what the street will use as its number to claim that amzn beat numbers. Alex gets added to my Holiday list, among others.
LP
PS You, I and the rest of the bearish team is slowing down, how the heck did I miss this one this morning.
The Wall Street Journal Interactive Edition -- July 21, 1998
A Hot Strategy: Declare Yourself
An Internet Firm as Soon as Possible
By JARED SANDBERG
Staff Reporter of THE WALL STREET JOURNAL
What does Donald Trump have in common with campy K-Tel records
and a California coffee-shop chain? A lust for life on the Internet.
Donald Trump, the headline-hungry real-estate magnate who raised hype
to an art form in the 1980s, is about to enter the industry that turned hype
into a gold mine in the 1990s. Mr. Trump, who brought gilded residential
towers, casinos and hotels to the East Coast, is expected to announce
Tuesday that he is forming yet another new company bearing his name:
Trump New Media LLC.
It doesn't have any employees or assets yet, but it does have plans. The
new Trump creation will work with closely held FreelinQ Communications
Corp. of New York to wire up residents with video-on-demand service
and high-speed Internet access for about $30 a month.
Just one question: What does Mr. Trump know about the Internet? "I'll tell
you what I know about it: Absolutely nothing," says the soundbite-savvy
Mr. Trump. "But I like what I see with the folks we're doing business with.
I'm more interested in supplying the people in my buildings with great
products."
In a frenzy of brand extensions, a mind-boggling range of companies are
reaching beyond their core businesses to cash in on the Internet's cachet.
The global computer network has been the source of such massive hype
--and frothy stock prices -- that few companies seem able to resist its
magnetic pull. Never mind that some of these companies -- a meat
marketer, a janitorial-supplies wholesaler, a producer of sausage casings
-- are low-tech. Core competencies be damned -- there's gold in them
thar Internet valuations.
Mr. Trump controls 20,000 residential apartments and could eventually
wire his hotel portfolio, which includes the Plaza in Manhattan, with
high-speed Internet service. He also plans to market the service to other
real-estate companies in New York and elsewhere. "I know all the owners
in New York. They're all friends of mine."
After all, look what happened to K-Tel International Inc., of Los Angeles,
purveyor of cheesy record compilations on TV, once it announced it
would be hawking the same thing on the Web. Its shares soared 125% on
the first trading day after it announced its Web ambitions in April, rising to
about $7.50 a share. They are now trading in the $11-plus range.
Here is a look at just some of the latest Net wannabes trying to surf the
Web wave:
Manx & Overseas PLC: The British electronics retailer and wholesaler
of plumbing goods and janitorial cleaning supplies swept its way into the
Internet way early -- in 1995 -- by investing in an Internet-access provider
and a Web design firm. Why?
"That's a good question," says Norman Quayle, company secretary,
before hastening to add that "the opportunity came along to improve our
shareholder value." Chairman Desmond Bloom said the leap into the
Internet raised Manx's share price from roughly $18 a share to about $50
a share. But the company soon decided that the money it had poured into
expanding the effort "was all wasted." Manx sold off its Internet properties
a few months ago, and the stock price is back down to around $8 a share.
Now Manx is readying a foray into Mr. Trump's business, real estate. Mr.
Bloom warns, "I doubt very much that Trump knows what he's doing. It's
a high risk."
Paradise Holdings Inc.: Born Java Centrale Inc., the Sacramento, Calif.,
coffee-shop chain had already morphed one time by adding a bakery
business. Then, it cooked up an Internet strategy by agreeing in May to
buy Axxess Inc., an Altamonte Springs, Fla., on-line financial-information
firm. Now Paradise is bailing out of baked goods and coffee klatches to
refocus on acquiring high-tech companies. "The growth in the Internet is
just the tip of the iceberg," says Gary Nelson, chief executive of Paradise.
Coyote Network Systems Inc.: This Westlake Village, Calif., company
recently changed its moniker from Diana Corp., which it used when it
made a living distributing meat and seafood in Milwaukee. But Coyote got
out of surf and turf to try its luck on the Net, buying a network-equipment
maker and entering the telephone service-by-Internet business.
What do meat and high-tech have in common? "One doesn't complement
the other," concedes company spokesman Anthony Squeglia. But the
high-tech foray helped the company's share price move to $120 a share in
May 1996 from a low of $12.375 the previous January. More recently,
the company was sued by shareholders after its shares came back down
to earth. "Being a meat company wasn't all that exciting," Mr. Squeglia
says.
ICC Technologies Inc.: The former Hatboro, Pa., manufacturer of
air-conditioning systems gives old meaning to the word "cool." In April, the
company shed its industrial operations and bought a slick New York
Web-design shop, Rare Medium Inc., for $45 million in cash and stock.
The reason why seems infallible: "To enhance shareholder value," ICC
said. So far, the plan has worked: Shares of ICC nearly doubled to about
$4 a share on word of its Internet entry and have pretty much stayed
there.
Virgin Net Ltd.: Planes, trains and auto-logons? The British empire of Sir
Richard Branson, better known for its airlines and record stores, has
boldly branched out into cola and cosmetics. Virgin also opened an on-line
service in late 1996 and now counts a respectable 120,000 subscribers.
But don't look for synergies. "They don't all fit together," says
spokeswoman Camilla Wingfield.
Zapata Corp.: The Houston-based producer of fish-oil and sausage
casings is trying to link its fortunes to the Internet. First it acquired two
"Webzines" with cool names -- Word and Charged -- and then took on a
cooler name itself: Zap. It also made a $72-a-share offer to merge with
Excite Inc., a Redwood City, Calif., search-engine company, which
mocked the fledgling offer. Laugh if you like, but on one day earlier this
month when the plucky Zap publicized plans to split into two separate
companies and buy 21 Web sites, its stock price more than doubled, rising
past $21. There it has stayed, closing Monday at $22.125.
Webspan Inc.: David Lichtenstein, a commercial real-estate developer,
complains that "there's nothing ever new happening" in his chosen
profession. So now, he also heads a New Jersey Internet-service
provider. "The Net's where it's at," he said last year. These days Mr.
Lichtenstein is trying to jump out of cyberspace as fast as he jumped in.
The company is trying to sell its Internet service but can't unload it. "It's
worthless," Mr. Lichtenstein says. "It's a horrible business."
That isn't to say The Donald will find similar misfortune, Mr. Lichtenstein
says, adding, "Trump is a magician." |
