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Technology Stocks : DRIV (DIGITAL RIVER). Get in on internet IPO. -- Ignore unavailable to you. Want to Upgrade?

To: Don P. who wrote (2265)	6/23/1999 4:46:00 PM
From: Greg h2o	Read Replies (1) \| Respond to of 3198

AlexBrown report...thought you guys might be interested in this (sorry for the formt): Andrikopoulos, Shaun G. (415) 477-4234 06/23/1999 Patel, Jeetil J (415) 477-4223 Deutsche Banc Alex. Brown --------------------------------------------------------------------------- ---- DIGITAL RIVER INC. [DRIV] "STRONG BUY" Meeting with Management Highlights Strength of Business--Positive Stock Catalysts on the Horizon--Reiterate STRONG BUY (1) Investment Rating --------------------------------------------------------------------------- ---- Date: 06/22/1999 EPS 1998A 1999E 2000E Price: 27.0 1Q (0.16) (0.27)A NE 52-Wk Range: 61 - 5 2Q (0.29) (0.30) NE Ann Dividend: 0.0 3Q (0.26) (0.30) NE Ann Div Yld: 0.00% 4Q (0.26) (0.29) NE Mkt Cap (mm): 537 FY(Dec.) (0.97) (1.16) (0.67) 3-Yr Growth: 100% FY P/EPS NM NM NM CY EPS (0.97) (1.16) (0.67) Est. Changed No CY P/EPS NM NM NM --------------------------------------------------------------------------- ---- Industry: MEDIA Shares Outstanding(Mil.): 19.9 Return On Equity (1998) : 0.0% --------------------------------------------------------------------------- ---- HIGHLIGHTS: --We had the opportunity to meet with Digital River management this week, and feel that the recent stock weakness represents an attractive entry point for growth-oriented investors. --Digital River is focusing its CommerceBridge efforts on top-quality Fortune 500 accounts, which should serve to build a strong referenceable account base. --The Company is also building a solid direct marketing capability in an effort to step up its efforts on driving end customer acquisition, conversion and retention among its client base. --We feel there is upside to our software client projections in coming quarters, as the Company has plenty of opportunities in signing up publishers for both ESD hosting and publisher partnerships. --Over the next 1-2 months, we anticipate several major announcements from Digital River that will significantly expand the story, and serve as stock catalysts for the Company. --We reiterate our 'Strong Buy' (1) investment rating on these shares. DETAILS: We had the opportunity to meet with Digital River management this week, and feel that the recent stock weakness represents an attractive entry point for growth-oriented investors. Based on our conversations, we feel that the Company is poised to enjoy strong momentum in coming quarters, as it enhances its core ESD service offering, and scales its emerging music and CommerceBridge business initiatives. Our thesis is intact, the Company is firing on all cylinders, and we are in front of several major announcements. COMMERCEBRIDGE - A FLIGHT TO QUALITY Digital River is focusing its CommerceBridge efforts on top-quality Fortune 500 accounts, which should serve to build a strong referenceable account base. We feel that the Company will continue to build its CommerceBridge account base before we begin to see major announcements in this unit. This move to the quality of accounts, as opposed to the quantity, is a strategy that we see will drive higher transaction volumes longer term. Moreover, we feel that the CommerceBridge business is equally as large a business-to- business e-commerce opportunity as it is a business-to-consumer e-commerce opportunity. BUILDING A DIRECT MARKETING CAPABILITY -- DEEPENING RELATIONSHIPS The Company is also building a solid direct marketing capability in an effort to step up its efforts on driving end customer acquisition, conversion and retention among its client base. We feel that this should drive client loyalty and mitigate churn longer term. The Company is deepening its account relationships and broadening its value proposition. SOFTWARE PUBLISHERS REPRESENT TREMENDOUS OPPORTUNITY The Company continues to build out its core ESD service and acquire new software clients. We feel that there is upside to our software client projections in coming quarters, as the Company has plenty of opportunities in signing up publishers for both ESD hosting and publisher partnerships. We are forecasting 1,947 publisher clients by the end of 1999, up from 1,677 in 1Q. We note that we are not looking for much upside to our 1999 retailer client projection of 1,576 as Digital River has already attracted many of the key accounts on this front. We note, however, that there still are several PC retailers which have not fully established Web businesses at this point, which represent an opportunity for Digital River. MULTIPLE CATALYSTS ON THE HORIZON - REITERATE STRONG BUY (1) INVESTMENT RATING Our meeting yesterday with Digital River management reminds us why we feel that Digital River represents a core long-term holding in the e-commerce space and one of our favorite small-cap investment ideas. In our opinion, the Company is truly establishing itself as the dominant player in the delivery of digital content over the Internet. Moreover, we feel that there are several catalysts on the horizon which should enhance investor enthusiasm and fuel stock price appreciation, including: (1) additional CommerceBridge announcements, (2) the potential launch and release of new ESD and product management offerings over the next several months, and (3) solid 2Q 1999 results (which should be once again ahead of our expectations). Over the next 1-2 months, we anticipate several major announcements from the Company that will significantly expand the story. We continue to believe that Digital River's superior business-to-business e- commerce service model will command both a premium long-term operating margin and should command a premium revenue multiple. We maintain our 12- month price target of $65 which is based on a 12x multiple of our 2000 revenue forecast of $100.0 mm. We reiterate our "Strong Buy" (1) investment rating on these shares. Additional Information Available Upon Request Deutsche Bank Securities Inc. maintains a net primary market in the common stock of Digital River Inc. Within the past three years, Deutsche Bank Securities Inc. or its wholly owned subsidiary, BT Alex. Brown Incorporated, has managed or comanaged a public offering of Digital River Inc.