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Technology Stocks : USWeb (USWB)
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To: Tradewell who wrote (632)10/6/1998 9:45:00 PM
From: Rick  Read Replies (1) of 1188
 
Steve -

I can imagine all of those exciting Web-based activities, but I am having problems imagining US Web justifying it's valuation.

There has never been any question about whether the Web is exciting, or represented real business opportunity. It is and it does. However, to date US Web has not demonstrated performance that would justify giving it it's current valuation.

My fair value model on USWeb after the CKSG deal is $8.20. This model assumes a continued favorable business environment, and give the benefit of the doubt that the merger won't be an integration disaster (not a given).

Inputs -

$230 Million year revenue
63.4 Million shares out
2 x 230 = 520 Million market cap
520 / 63.4 = $8.20
If they make 10% margin, that yields a PE of 20

That's the max I would pay today (note that CATP sells at less than 2 times revenues), and if this current so-called economic crisis or Y2K spending affects companies appetite for IT services, it will go lower than this.

On the intangibles, the situation gets worse. It's just an investment story gone wrong.

Can you imagine when the extra 20 million shares floating around when the CKSG deal completes what is going to happen ? I certainly can. And if you believe that horsesh.. about a share buyback, I got some shares in South Florida Real Estate to sell you.

Rick.
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