NSOL HAS SOME FRIENDS IN WASHINGTON ˆ We believe very little has really
changed competitively, despite lots of regulatory noise and confusion
regarding competitive implications. We expect ICANN to resolve most of
the issues sooner than later, leaving NSOL in a position to continue
taking advantage of its marketing lead. We were pleasantly surprised
this week by strong signs of regulatory progress. Tom Bliley, Chairman
of the House Commerce Committee, sent a formal complaint letter to ICANN
regarding the way it is handling the process of taking over management
of domain name registration. This committee is one of the key bodies
that crafts the laws that govern the Commerce Department and now ICANN.
Essentially, Bliley suggests that that ICANN has overstepped its
authority and is violating the spirit of its charter. The political
imperative is not to slow down the growth of the Internet. In
particular, Bliley criticized ICANN‚s plans to impose a $1 tax
registration fee on each domain name, to help pay for a $5.9 million
budget. In addition, Bliley expresses his anger over hearing threats by
ICANN to Network Solutions. ICANN had set a deadline of this week for
finalizing pricing for the registry function provided by NSOL to manage
the database. At this stage, we believe the current price of $9 per
year is fair and we would view it as very positive for NSOL if ICANN
decided to maintain the status quo. In our view, ICANN may have
underestimated the complexity of the process. We expect a formal
announcement that the test bed will be extended. We would view this as
positive for NSOL.
Other initiatives are ongoing to promote Internet growth. This week,
Senator Abraham of Michigan introduced a bill to make cybersquatting
illegal. Cybersquatting is when someone buys rights to a domain name
with the intention of reselling the name for a profit. Abraham‚s bill
calls for a first conviction to be considered a misdemeanor and a second
conviction a felony. This could help deal with trademark confusion,
which seems to be the biggest hurdle to overcome before additional
domain extensions might be approved by the Commerce Department.
Incremental domain names could expand the market for NSOL and others.
TMCS: We believe TMCS stock has lagged the group because of lack of
news and the general glut of new stocks. We expect the stock will
recover sharply, helped by strong numbers. TicketMaster-CitySearch and
American Express announced a new program which we believe will further
increase the growth of the CitySearch CityGuides by getting more small
and medium size businesses online and into the CitySearch network.
Currently piloting in New York, the program provides merchants who
purchase a CitySearch Web site with a free Dell computer. Merchants
receive a Dell Computer with a monitor, installation and other services,
and a 3-year warranty when they purchase a $390/month web site package
with a 2-year commitment. We believe this program fits with TMCS‚
strategy and will further contribute to the growth of its network as
well as the depth of its content. We continue to be impressed with the
strong growth not only in the ramp of CityGuide rollout but also in
ticket sales and other eCommerce activities. We have seen a constant
flow of positive announcements beginning with positive Q1 earning
results when ticket sales were double our estimates, continuing with the
acquisition of two leading online dating sites, and most recently the
announcement of this partnership.
DIGITAL RIVER: We are encouraged by signs that Digital River is
successfully positioning itself to expand past the shareware market into
other categories, including non-software products and music. The
company has recently added a dozen new non-software clients, including
Fijitsu and Hewlett-Packard. Digital River provides the backend
transaction functions for Fijitsu‚s selling of computers online and
Hewlett-Packard‚s selling of its all-in-one printer/scanner/fax
machines. We believe Digital River is well positioned to become the
leader in the digital commerce and outsourcing of digital commerce
markets.
eTailing Update ˆ Lauren Cooks Levitan 415-693-3309
mailto:lauren@rsco.com
NEW INDEX - eTailDex - This week we launched a new index of stocks
called the eTailDEX. The eTailDEX tracks the performance of the stocks
of 24 online retailers with an aggregate market capitalization of $65
billion. This week the eTailDEX increased 6.3% to 1,173.95 versus
1,104.25 last week. Despite this move, the index is down over 33% from
its 52-week high.
EBAY ˆ BACK TO BUSINESS AS USUAL - Shares of eBay have recovered
somewhat following the loss of nearly $5 billion in market
capitalization following recent site outage problems. We are encouraged
that eBay‚s auction listings appear to have returned to previous levels
following the outage, bouncing back from a low of 1.8 million listed
items to above 2.3 million. This quick rebound reflects eBay‚s
importance to its community and positioning as eTailing‚s leading
auctioneer. In addition, this week eBay extended its international
presence, this time via the acquisition of Alando.de, a leading German
online auctioneer. Given Germany‚s estimated 10 million Web users, we
view this acquisition as a significant step in eBay‚s international
expansion program. Finally, May Media Metrix results for eBay reflect
the company‚s continued strong momentum with unique visitors increasing
14.8% to an impressive 8.2 million. Despite the 8.8% decline in eBay‚s
average monthly usage minutes from 125.5 to 114.4 minutes, eBay‚s
average time spent is still the highest of any shopping site. We look
for continued solid trends and the likelihood that the company will
exceed revised Q2 revenue estimates to drive shares of eBay back.
AMAZON GROWING PAST SPRING SEASON ˆ We continue to recommend aggressive
purchase of the shares in anticipation of positive Q2 results, expected
to be announced July 21st, as well as the prospect of additional product
category announcements or investments. May‚s Media Metrix results affirm
Amazon‚s popularity and leadership position with shoppers and supports
our contention the company is pioneering a secular shift from offline to
online retailing. Specifically, Amazon‚s reach increased 4.6% during May
to over 9.9 million unique visitors, making it once again a top ten Web
property. We continue to believe that Amazon.com is solidly positioned
to still be the first place we think of when we think of online
shopping. To us, this points to a large market value.
ALLOY ONLINE ˆ LEADING THE GENERATION Y FRANCHISE ONLINEˆ As a recent
IPO, we believe shares of Alloy Online have been lost in the clutter.
We believe Alloy‚s current valuation presents investors with a
compelling opportunity to tap into one of eTailing‚s least exploited
categories ˆ the Generation Y market. When we consider Gen Y‚s
potential impact on retail sales over the next several decades and
Alloy‚s growing presence with this key demographic group, we believe the
company could grow into a very large business.
ETOYS ˆ LEADING THE LITTLE GENERATION ONLINE ˆ As eTailing‚s first true
category killer with the back-end capabilities in place to scale its
business, we believe eToys‚ is positioned to gain considerable share of
the at least $100 billion retail market for children‚s and baby
products. We believe the stock has stalled at current levels based on
investor concerns surrounding seasonality and additional competition,
including the likely entrance of Amazon.com into the toy arena. We
remain confident that eToys‚ solid brand positioning and proven
execution capabilities should enable the company to maintain its
leadership position even in a more competitive environment. Thus, we
recommend investors accumulate the stock in advance of this year‚s
holiday season and in advance of what we anticipate will be positive
announcements regarding additional complementary product categories.
TAXING THE INTERNET ˆ JUST SAY „NO‰ ˆ The group charged with examining
the effects of taxation on the Internet, The Advisory Commission on
Electronic Commerce, met for the first time this week. The major issue
at hand is whether online transactions should be taxed once the
moratorium on such taxes expires in October 2001. Like catalogs, Web
sales taxes are only paid when the eTailer is based on the same state.
As such, eTailers have an inherent tax advantage over local retailers.
The Commission is comprised of representatives of high-tech firms and
state and local governments and was predictably split between party
lines. Government representatives argued that taxation was necessary to
level the playing field with brick and mortar retailers and support the
local tax base. As one local official put it, „*when you are sitting at
home in your virtual world and you have a short and a fire breaks out ˆ
do you want us to send a virtual fire truck or a real big fire truck?‰
On the other hand, the anti-tax advocates (the private sector
representatives) countered that the current sales tax system is too
cumbersome to be applied to eCommerce, and that taxation will limit the
potential growth of the Internet and the economy as a whole. We agree
with the latter opinion, and expect the Commission will maintain the
status quo by recommending that online transactions remain tax-free when
it submits its findings in April 2000. We expect that the overall
benefit of the Internet to the U.S. economy will far outweigh any
projected loss in tax revenue. Furthermore, despite the projected
growth of Internet commerce, online retailing will remain a fraction of
total retailing in the United States, leaving plenty of room for brick
and mortar operations to coexist. Notably, we expect that by the time
the existing tax moratorium ends in October 2001, consumers will have
gained considerable dependence on online shopping alternatives with
improved targeting leading to increasingly convenient shopping
experiences. As such, consumers will be less inclined to return to
physical stores to save on any sales tax. Even with sales taxes paid in
the customer‚s state, it would generally affect all eTailers equally.
NEW TEAM MEMBER - We are joined in our commentary on the evolving Web
health care market by Sheryl Skolnick, Managing Director, and Senior
Analyst in our health care group.
THE EVOLVING ONLINE PHARMACY MARKET - This week, Rite Aid, General
Nutrition Centers and drugstore.com announced a 10-year agreement under
which drugstore.com will be the exclusive online retailer of Rite Aid
and GNC products. Meanwhile, RiteAid (which owns pharmacy benefit
manager PCS) and GNC gained a combined 33% ownership in drugstore.com.
This announcement followed CVS‚ purchase last month of Soma.com with
both transactions demonstrating the dramatic convergence of eTail and
retail companies in the pharmacy category in particular. We believe
this accelerated convergence is, in part, driven by an important issue
that does not affect other eTailing product categories -- third-party
pay. In our view, there is a multi-dimensional chess game being played
involving the Web-based drug store startups, the land-based retailers
and the PBMs, and that ultimately may involve the pharmaceutical
companies and insurance companies themselves. We anticipate these
strategies will continue to evolve with more moves from various players
expected over the coming months. Given the size and importance of this
consumer market segment, with solid growth anticipated as the population
ages, we still believe there is sufficient room for multiple winning
business models.
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Rating 6/25 6/17 1-Wk 52-Wk Chg
Chg High 52Wk Hi
6/17 - to 6/25
6/25 Price
Alloy Online ALOY BUY 11 10 9% 23 1/6 -52.8%
Amazon AMZN SBUY 113 5/8 113 1% 221 1/4 -48.6%
America Online AOL SBUY 106 3/4 110 2/3 -4% 175 1/2 -39.2%
AutoWeb AWEB BUY 11 7/8 12 1/2 -5% 50 -76.3%
Beyond.com BYND BUY 27 4/5 21 5/8 29% 41 1/3 -32.7%
CareerBuilder CBDR BUY 13 11 1/4 16% 20 -35.0%
CDnow CDNW MP 17 4/5 15 4/5 13% 39 1/4 -54.6%
CMGI CMGI BUY 96 1/2 96 1/2 0% 165 -41.5%
CNET CNET BUY 50 49 3/8 1% 79 3/4 -37.4%
Digital River DRIV BUY 26 7/8 23 3/4 13% 61 3/8 -56.2%
DoubleClick DCLK BUY 81 2/3 87 7/8 -7% 176 -53.6%
Ebay EBAY BUY 142 1/8 146 3/4 -3% 234 -39.3%
Egghead EGGS BUY 10 3/4 10 1/4 5% 40 1/4 -73.3%
eToys ETYS BUY 39 40 -3% 85 -54.2%
Excite@Home ATHM BUY 53 51 1/3 3% 99 -46.5%
Gemstar GMST SBUY 58 2/3 55 5/8 6% 67 5/8 -13.2%
Getty GETY BUY 19 1/4 20 -4% 30 1/2 -36.9%
InfoSpace.com INSP BUY 44 1/2 45 -1% 72 5/8 -38.7%
Lycos LCOS BUY 95 4/9 89 1/2 7% 145 3/8 -34.3%
Mapquest.com MQST BUY 16 1/8 13 3/4 17% 35 5/9 -54.7%
Media Metrix MMXI BUY 39 3/4 38 3/4 3% 56 5/8 -29.8%
Modem Media
Poppe Tyson MMPT BUY 24 1/2 26 3/8 -7% 55 1/8 -55.6%
Multex.com MLTX NR 24 2/3 28 -12% 71 1/2 -65.5%
NetGravity NETG BUY 18 3/8 18 3/4 -2% 66 7/8 -72.5%
NetPerceptions NETP BUY 17 1/8 17 1/2 -2% 35 -51.1%
Network Sols NSOL BUY 74 70 2/3 5% 153 3/4 -51.9%
NewsEdge NEWZ MP 7 7/8 7 7/8 0% 14 1/4 -44.7%
Onsale ONSL BUY 18 1/8 18 0% 108 -83.2%
Priceline.com PCLN SBUY 102 89 15% 165 -38.2%
Preview Travel PTVL BUY 20 4/9 15 2/3 30% 44 -53.6%
Infoseek SEEK MP 46 1/5 47 4/9 -3% 100 -53.8%
SportsLineUSA SPLN BUY 32 1/3 34 5/8 -7% 59 1/4 -45.5%
StarMedia STRM BUY 49 5/8 40 24% 66 -24.8%
TicketMaster Online
CitySearch TMCS BUY 23 22 1/2 2% 80 1/2 -71.4%
YouBet UBET BUY 12 4/7 13 7/8 -9% 17 7/8 -29.7%
Value America VUSA BUY 20 1/8 18 1/2 9% 74 1/4 -72.9%
Xoom.com XMCM BUY 47 3/8 48 3/8 -2% 98 1/2 -51.9%
Yahoo! YHOO BUY 151 142 1/4 6% 244 -38.1%
NETDEX Index
NETDEX 564.93 555.91 1.6% 801.41 -29.5%
KEBDEX Index
KEBDEX 871.40 870.99 0.0% 1,273.17 -31.6%
NASDAQ
Composite Index
COMQ 2,553.99 2,544.15 0.4% N/A N/A
(1) Change based on last 12-month's performance.
Source: AT Financial Information and BRS Estimates
BancBoston Robertson Stephens maintains a market in the shares of Alloy
Online, Amazon.com, AutoWeb,Beyond.com,
CareerBuilder, CDNow, CMG, CNET, Digital River, DoubleClick, eBay,
Egghead, eToys,E*Trade, Excite @Home, Gemstar,Getty,
Infoseek, InfoSpace.com, Modem Media Poppe Tyson, Lycos,
Multex,Mapquest.com, Media Metrix, NetGravity, Net Perceptions,
Network Solutions, NewsEdge, ONSALE, Priceline.com, Preview Travel,
SportsLine, StarMedia, TicketMaster Online-CitySearch,
Youbet.com, Value America, Xoom.com and Yahoo! and has been a managing
or comanaging underwriter or has privately placed securities of
Alloy Online, AutoWeb,Beyond.com, CareerBuilder, Digital River, eBay,
Egghead, eToys, E*Trade, Excite @Home, InfoSpace.com,
Modem Media Poppe Tyson, Multex, Mapquest.com, Media Metrix, NetGravity,
Net Perceptions, Network Solutions, ONSALE,
Priceline.com, Preview Travel, StarMedia, SportsLine, TicketMaster
Online-CitySearch, StarMedia, Youbet.com, and Value America within the
past three years.
Rating Definitions: The following are basic definitions for our
recommendation ratings.
Strong Buy ˆ Rating for a stock, which we believe could have
significant, positive price movement near-term and/or represents
outstanding competitive and business model potential. Therefore, we
would be aggressive buyers of the stock.
Buy ˆ Rating for a stock, which we recommend buying, however believe
there may not be near-term news or events to move the stock price.
Long-Term Attractive ˆ Rating for a stock, which we believe could have
long-term value, however we would not necessarily recommend buying.
Market Performer ˆ Rating for a stock, which we believe will perform at,
or below, market levels.
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Unless otherwise noted, prices are as of the close June 24, 1999.
FOR ADDITIONAL INFORMATION, PLEASE CALL YOUR BANCBOSTON ROBERTSON
STEPHENS REPRESENTATIVE AT (415) 781-9700.
The information contained herein is not a complete analysis of every
material fact respecting any company, industry or security. Although
opinions and estimates expressed herein reflect the current judgment of
BancBoston Robertson Stephens, the information upon which such opinions
and estimates are based is not necessarily updated on a regular basis;
when it is, the date of the change in estimate will be noted. In
addition, opinions and estimates are subject to change without notice.
This Report contains forward-looking statements, which involve risks and
uncertainties. Actual results may differ significantly from the results
described in the forward-looking statements. Factors that might cause
such a difference include, but are not limited to, those discussed in
"Investment Risks." BancBoston Robertson Stephens from time to time
performs corporate finance or other services for some companies
described herein and may occasionally possess material, nonpublic
information regarding such companies. This information is not used in
the preparation of the opinions and estimates herein. While the
information contained in this Report and the opinions contained herein
are based on sources believed to be reliable, BancBoston Robertson
Stephens has not independently verified the facts, assumptions and
estimates contained in this Report. Accordingly, no representation or
warranty, express or implied, is made as to, and no reliance should be
placed on, the fairness, accuracy, completeness or correctness of the
information and opinions contained in this Report. BancBoston Robertson
Stephens, its managing directors, its affiliates, and/or its employees
may have an interest in the securities of the issue(s) described and may
make purchases or sales while this report is in circulation. BancBoston
Robertson Stephens International Ltd. is regulated by the Securities and
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The securities discussed herein are not FDIC insured, are not deposits
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Copyright * 1999 BancBoston Robertson Stephens Inc. |
