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Technology Stocks : CheckFree Holdings Corp. (CKFR), the next Dell, Intel? -- Ignore unavailable to you. Want to Upgrade?

To: Mike Milde who wrote (6882)	6/24/1999 9:43:00 AM
From: JB	Read Replies (1) \| Respond to of 20297

BRAD: CKFR: "EXCHANGE" NOT EXPECTED TO COMPETE IN BILL PAYMENT (First Call 06/24 09:34:09) 09:29am EDT 24-Jun-99 J.C. Bradford & Co. (BOB BOLEN (615) 748-9653) CKFR J.C. Bradford & Co. Research Note June 24, 1999 CHECKFREE HOLDINGS CORP. (CKFR-$28 3/4-OTC) "Exchange" Not Expected to Compete in Bill Payment; Stock Believed Oversold Rating: Buy Robert V. Bolen, CFA (615) 748-9653 FY June EPS: 1998 1999E 2000E Shares O/S 1Q ($0.06) ($0.05)A 55.5 mil. 2Q ($0.02) $0.00A 3Q $0.00 $0.04A 4Q $0.03 $0.05 Full Year($0.05) $0.04 ($0.25) * Three big bank customers to create bill-presentment "exchange," which should simulate Ebill presentment industry, which in turn should help CheckFree on Ebill payment * Competition in bill presentment not an original thought; banks not expected to move into bill payment * CKFR launching third-generation Ebill capabilities and will remain leader in full end-to-end EBPP capabilities * Volatility likely to remain a hallmark of this stock, but believers should use weakness to add to or establish positions, in our opinion CheckFree traded 16 million shares and was off $9 after Chase Manhattan Bank, First Union, and Wells Fargo & Co. announced the formation of a new company that will seek to control the flow of electronic bills. Dubbed "The Exchange," this new for-profit company proposes to establish a directory and routing "switch" with electronic look-up facilities to present electronic bills to its member consumers. This service will be offered to member banks; they in turn will attempt to sell to billers. The banks see this as a natural attempt to broaden their Treasury Management services (lock box, etc.) to corporate accounts. CheckFree provides this functionality within its Ebill- presentment service and the market took the announcement as the company's death knell. We beg to differ and believe the market has overreacted. We recommend using this reaction to add to or establish positions. Rebuttal #1: CheckFree is preparing its third-generation Ebill service offering for market delivery, which encompasses full end- to-end bill-audit trail functionality, one-to-one marketing capabilities (designing a specific ad based on the consumers' buying habits), bill parsing, HTML conversion consulting, and a strong switch-service capability. (Billers want partners with large distribution capabilities; CKFR has compelling offering with most of the banks and likely the portals). The company has been successful in the marketplace, signing up over 50 of the top 100 billers to date versus only a few for the banks. We believe CheckFree will continue to win its fair share in the marketplace given The Exchange is at least one year away (we think two or more years) from entering the market in earnest. Furthermore, CheckFree is preparing to spend and develop aggressively to capture additional biller business. Rebuttal #2: The banks use CheckFree for electronic bill payment (representing about 20% of CKFR's electronic-commerce revenue) and we see no indication this consortium has plans to recreate this capability, which encompasses a sophisticated remittance- processing engine and end-to-end customer-care facilities. To the extent The Exchange captures bill-presentment market share and the bills are presented to bank consumers, CheckFree will continue handling the payment side, which is the source of essentially 100% of its ecommerce revenue. If The Exchange is successful it will expand the overall market, which will benefit CheckFree. We detest the timing of this announcement and what it did to the stock. Management denies any knowledge of this development and we believe them. The company has been competing with banks' treasury- management activities for over a year, and the banks' effort to keep quiet seems reasonable to us. We believe several factions will develop over time and they all will have to work together (read interoperate) for a robust EBPP industry to develop. CheckFree has indicated it will link into The Exchange if they have bills that need presenting to Exchange bank consumers, and The Exchange will absolutely (if they win any billers) have bills that need to be routed to consumers controlled by CheckFree banks (or nonbanks for that matter). We believe this announcement does little to tip the balance of power against CheckFree, but hopefully it will invigorate the market for electronic bill payment and presentment. Clearly, the market does not readily understand the company's strengths in remittance processing, customer care, and end-to-end bill- presentment services. We recommend purchase at the current price and believe the stock will recover relatively soon. The portal business will be launched within several weeks. Additional information available on request The information contained herein has been derived from sources which we believe to be reliable but has not been independently verified by us. This material does not purport to be a complete statement of all data relevant to any security mentioned and additional information is available on request. The opinions expressed herein reflect our current judgment and are subject to change without notice. Partners and/or employees of this firm may from time to time have either a long or short position in the securities mentioned. Orders to buy any security are not solicited and will not be accepted in any state where sales of such security are not permitted. J.C. Bradford makes a market in this security. This analyst holds shares in this security. First Call Corporation - all rights reserved. 617/345-2500 END OF NOTE [SU COM.1 CUS.1 CNA.1] [IN DATAPR.1 COMPUT.1] S.FL BRAD.1 CKFR COM.1 CUS.1 CNA.1 DATAPR.1 COMPUT.1