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Strategies & Market Trends : Anthony @ Equity Investigations, Dear Anthony,
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To: AD who wrote (31827)4/21/1999 4:37:00 PM
From: J.Y. Wang  Read Replies (2) of 122087
 
<NSOL>

Let me give you a very quick analogy of why NSOL is really screwed.

Imagine if the judge in the MSFT trial ruled that he is going to make MSFT's operating systems available to its competitors in order to dilute the power MSFT has over the market. Keep in mind that the monopoly MSFT has is earned while the monopoly NSOL has is given. This is important because that means MSFT's products/services have merit on their own; No one knows about NSOL's registration services and whether it can stand on its own in a competitive environment.

So the judge rules that MSFT has to make available its operating systems to its competitors (SUNW, NOVL, IBM, whores-online.com, whatever) *at its R&D cost*. So instead of charging $100 for Win98 and $200 for WinNT, MSFT can only charge its competitors, say, $10 for Win98 and $20 for WinNT.

Two things will happen: 1) MSFT will lose some business to its competitors; 2) MSFT will no longer be able to sell Win98 for $100 and WinNT for $200 -- $15 and $30 are probably close to what they would sell it for. This is very similar to what is going to happen with NSOL.

NSOL states in its 10K that its primary business is domain registration. It does some intranet and internet consulting on the side (how much of that business will they lose when it's open season on domain registration?). NSOL is very profitable because it charges outrageous rates for essentially maintaining a database. Not only that, it was given the regular internet P/E ratios (in the hundreds).

So instead of being granted monopoly as its primary business, NSOL will now be in a commodity service industry as its primary business. The difference is huge. NSOL is going down.
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