USWeb/CKS: One-Stop Shop to dot-com Your Biz
Stocks such as Amazon.com (Nasdaq:AMZN - news) and Yahoo! (Nasdaq:YHOO - news) are grabbing plenty of glory in the current Internet frenzy, but there are also some behind-the-scenes companies that offer the same sort of potential to ride the growth phase of this emerging Internet economy. You might call them the "picks and shovels" stocks, companies that provide enabling technology and services to the gold rush of web prospectors. USWeb/CKS (Nasdaq:USWB - news) is one such company.
USWeb has emerged as the dominant player in web site development and other Internet-related professional services. By merging with CKS late last year, the company added design, advertising and marketing strategy services for web business initiatives. The result is a powerful combination of technical and creative expertise. USWeb/CKS is profitable, placing it among the select few in the world of Internet stocks.
Web consulting services is already a booming industry, but it is really expected to kick into high gear over the next few years as more and more companies realize they must adapt or perish in the digital era. The web is increasingly used not just for content, marketing or e-commerce, but as a tool to augment nearly every aspect of business processes. Accounting, supply chain management, customer and employee communications are just a few examples of ways that any company whose core business is not web-related can, and likely will, use the Internet to improve its business efficiency. So USWeb's potential customers are not just companies like a Barnes & Noble (NYSE:BKS - news) looking to evolve an existing retail business into an e-business, the market for web consulting services addresses everything from Fortune 500 manufacturers to Joe's Plumbing Supply....dot-com.
Internet stocks have made quite a run in recent months, and USWeb/CKS is no exception. The stock has soared from an October low of $7.75 to as high as $47. Prior to that it was in a six-month death spiral. Volatility goes with the territory for Internet stock investors, but at least USWeb/CKS has a fairly established business and actual earnings to look at. The company is expected to earn $0.43 per share this year and $0.75 next year, according to the analyst consensus. The annual growth rate is pegged at 55% over the next five years.
The CKS buyout, along with 35 smaller acquisitions in the past two years, has contributed to explosive revenue growth to date. 1998 sales doubled from the prior year to $229 million. Going forward, the company says it will be less aggressive on the acquisition front, but then it has all the pieces in place to foster tremendous organic growth. One key to executing on that potential will be the smooth integration of CKS into the USWeb fold. CKS is a creative bunch while USWeb had a very technical atmosphere, so there is no telling what kind of chemistry will result.
USWeb/CKS has established itself as the one-stop shop for Internet-related professional services. Its roles in the Internet revolution isn't quite as glamorous as the eBays (Nasdaq:EBAY - news) and AOLs (NYSE:AOL - news) of this world, but the "picks and shovels" companies like this sometimes offer investors a way to participate with less risk and just as much potential for growth. |
