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To: Rascal who wrote (24744)	7/2/1999 9:08:00 AM
From: James Thompson	Respond to of 41369

BANCBOSTON ROBERTSON STEPHENS Keith E. Benjamin, CFA - 415-693-3285 mailto:Keith@rsco.com July 2, 1999 Excerpt from The Web Report - Volume 2, Issue #25 This week, the NETDEX index rose 8.9% from last week to 614.99. For comparison, the NASDAQ ended the week up 6.0% from last week. SUMMER STRENGTH - We are relieved and encouraged by signs of selected strength in some of our favored Internet stocks. With reporting season kicking off next Wednesday when Yahoo! reports, we expect evidence of improving fundamentals and further stock progress. We don?t expect many new highs will be reached, with investors holding back in fear of a slow August. With less volatility, we do not expect to see many stocks return back to recent lows either. As such, we remain focused on stocks that have not recovered as much and should benefit from reports. These include recent IPOs, like Mapquest, and a few more seasoned stocks lost in the shuffle of so many deals, like Lycos and TicketMaster Online-CitySearch. INTERNET ADVERTISING STEPPING UP TO NEW LEVELS - Valuation levels may distract some from the rising levels of revenues being derived from advertising and direct marketing. This week, Procter & Gamble and Bank One announced deals to spend more money to reach customers online. We believe these deals provide a solid sign that fundamental trends are improving for the group. Procter & Gamble announced it plans to significantly increase its Web advertising spending, starting with Yahoo! Its spending had been just $12 million of its total advertising budget of $3.7 billion last year. We don?t know the new number, but suspect it is multiple times higher. P&G brands will now be heavily integrated into various Yahoo! channels. We believe this provides an indication of the value of Web advertising to help build brands for products purchased offline. Maybe gentle reminders about the Pringles will make you more likely to grab a can next time you?re in the store. Of course, direct marketing of products that can be purchased online continues to attract more merchant activity trying to attract new consumers. Continuing consumer response is fueling higher prices paid to reach audiences. This week, Lycos announced an agreement with Wingspan Bank.com, the online unit of Bank One Corporation, to allow Lycos? users to conduct financial transactions online. We expect the deal to generate at least $135 million in revenues to Lycos over the next five years. With over 30 million unique users, this suggests a value of $4.50 per user. We believe Lycos? stock is still suffering from confusion over whether it will be acquired, without enough focus on its ability to make its own acquisitions and soon post profitability, with the help of deals like this. GIVING AWAY THE PC TO LOCK UP A CUSTOMER - AOL and Prodigy have succumbed to the trend of offering cheaper (even free) PCs in order to drive mass market Internet acceptance. Starting this weekend and lasting through July, those who sign up for three years of unlimited access through AOL?s CompuServe unit will receive a free PC. AOL will actually rebate customers $400, once they purchase a low-cost PC from a pre-selected manufacturer. While this may seem expensive on the surface, we expect future rebates to be smaller. Even then, AOL can justify paying more than its long-term average marketing cost of about $100 per net customer, because of the effective elimination of churn, which we estimate is running around or under approximately 10% per year. The revenues for three years of unlimited access works out to be approximately $800 for the consumer. Prodigy also plans to offer a $400 rebate to customers who sign up for three years of its service, and who purchase PCs from Best Buy. Roughly a dozen PC companies are emerging to offer cheap, or free PCs in exchange for bounties from access providers. Of course, the consumer still has to pay the full price for access. We believe AOL will be able to maintain its majority share of these bundled deals, given its strong brand. We expect this trend will hurt PC manufacturers, but benefit most Web content and commerce companies, as more people can afford Web access. CMGI MAKES BIG MOVE - CMGI announced plans to buy 83% of Alta Vista for $2.3 billion in CMGI stock, valuing Alta Vista at $2.7 billion. We estimate Alta Vista generates more revenue than Lycos, which has a market value of $4.7 billion, suggesting a reasonable price for Alta Vista. Management believes the acquisition of Alta Vista will help crystallize CMGI?s Internet group of affiliates, leveraging a top-10 Web property with several smaller Web sites and services. CMGI aims to make Alta Vista more valuable by building its commerce backlog and adding community services. It appears logical that CMGI could make more modest acquisitions and consolidate them into a new Alta Vista for a potential future IPO. CMGI may also work effectively with Compaq to promote a commerce-enabled Alta Vista to individual PC buyers and the host of CMGI business service companies to Compaq?s enterprise clients. We estimate that CMGI?s asset value is at least $38 per share. If we take an optimistic stance regarding the IPO prospects for each of the more than 30 investments, we estimate the asset value at $150.

To: Rascal who wrote (24744)	7/2/1999 3:27:00 PM
From: Mary Baker	Read Replies (1) \| Respond to of 41369

Oh Please Rascal...tell me that isn't so...I prize my SI sanctuary and would hate to have it defiled.