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Non-Tech : Valley Media (VMIX) IPO
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To: Glenn Petersen who wrote (129)5/14/1999 9:20:00 AM
From: Paul Hackett  Read Replies (2) of 298
 
>>>>>VMIX will never command an "Internet valuation." It is a distributor and distribution is a low margin business which generally does not command a premium valuation. You need to also bear in mind that Internet related sales account for only about 20% of VMIX's business, though that segment is going to grow more rapidly than the other parts of VMIX's business. Given that, I think that the company will command a moderate premium over other distributors and the stock should move back into the 30s.<<<<<<<<<

VMIX is THE Internet e-commerce music distributor. Internet e-commerce is a low-margin business, why should AMZN or anyone else have a high valuation?

I think a good argument for VMIX being given a higher valuation is because it is NOT a traditional distributor due to it's agreements with e-commerce retailers. Also the risk and the competition is minimal, what other large companies can make that claim? They're in a great position right now, and I'm not aware of anyone challenging them. These factors should also contribute to a higher valuation.

The only reason that sales account for only 20% of total revenues is because e-commerce is so new. Within one-year of 4/99, at anything near current growth rates, VMIX' New Media division will probably surpass traditional store sales. Within 2 years, it will more than double them.

I think the 30's are a low-ball short-term starting price. I like this stock a lot.

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