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To: Dr. Microcap who wrote (43)	7/3/1999 3:21:00 PM
From: Herc	Respond to of 827

Cybercash, CYCH, got flattered in today's Barrons. And WAVX got dissed. Both are internet cash transfer software companies. The excerpt... <<Q: Okay, tell us some stories. A: One company that we have been shorting recently is Wave Systems. Wave's business is providing a hardware/software solution for e-commerce to allow all sizes of transactions, especially micro-transactions. The company has been around since 1988 and has total revenues over that 12-year period of less than $25,000. The stock languished for years in the $1-$4 range until recently. A series of private stock placements coupled with optimistic press releases and overall Internet hype pushed the stock as high as $29 in March. It now stands at 18 1/4 . Wave Systems in the past tried to sell their technology, with little success. Their current business model is to give away their technology for free, and to be a middleman in each transaction. Their EMBASSY system will be embedded in I/O chips used in PCs. A customer will contact Wave and buy credit to be stored securely on his PC. That customer can then buy small items, like MP3 files or computer games on a pay-per-view basis. Wave envisions keeping 40% of the price of the transaction. The computer manufacturer will get 10% as his incentive to install the technology in the first place, and the content provider will get 50%. Contrast that with Visa, which keeps only 2%-3% of each transaction. We think the company has a very limited chance of success. Computer manufacturers must first accept this e-commerce solution and install it on a sufficiently large customer base. Content providers must view this as a viable way to be paid and modify their product offerings. Content providers must also be willing to give up 50% of the revenues of the transaction just to transact. Finally, consumers must be willing to send money to an unknown company like Wave Systems to deposit in the "cash register" on his PC and must be willing to keep that money there until he transacts. All of these steps seem highly unlikely to us. Several competitors, including CyberCash, offer e-commerce solutions for micro-transactions. None has had much success so far. If the micro-transaction market ultimately becomes an attractive one, we think the big players like Visa will dominate it, not some company with neat-o encryption technology like Wave Systems. Q: So what's it worth? A: After the completion of a recently announced acquisition, the company will have 34.5 million shares outstanding, giving it a hefty market capitalization of $630 million. Wave has $21 million in cash and is losing $3.7 million per quarter. Shares issued in recent private placements have just been registered for sale and could hit the market shortly. We think the stock will go back to the low single-digit level.>>