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

To: jjs_ynot who wrote (7904)	7/11/1999 7:51:00 PM
From: Erik T	Read Replies (1) \| Respond to of 20297

The USPS has designs on secure e-mail. There is another company I remember hearing about a couple months ago, based in Canada I think, that is working on a secure email system also. I am very intrigued that is appears that PayMyBills.com seems to have a pay anyone service. This has been a stumbling block for some of the biggest players out there. Oracle failed, Transpoint ala Microsoft still does not have this system after 2 years. Why would this little outfit have a system of seeming complexity up and running already? If it is true it seems their offering is more important than I gave them credit for. I still wonder how they will be at making money. CKFR does their part all electronically except for stuffing a check in an envelope for paper check payments, and is just reaching profitability now with millions of customers. PMB.com has big expenses, paying people to tear open paper bills, scan, etc. I would be surprised if they can make money at this, especially if they plan on significant customer service reps. An interesting development Erik

To: jjs_ynot who wrote (7904)	7/11/1999 9:57:00 PM
From: jjs_ynot	Respond to of 20297

Piper Jaffray Report (Strong BUY) as captured from ragingbull (Part 1): ragingbull.com CKFR Piper Jaffray Reiterates Strong Buy. Read!... First Union, Chase, and Wells Fargo Announce Formation Of Consortium To Help Get Billers Online; Will Compete With CheckFree To Sign Up Billers, But NOT for Online Bill Payment Services; Sell-Off Overdone As Competitive Threat is Minimal For Next 9 Months; Reiterate STRONG BUY Rating Key Points: (Left out first point which describes what the exchange is but piper ended it by saying, "The details on the level of commitment and strategy (from TEX) were few and far between. Mild Competive Threat. Like Transpoint, the exchange will focus only on bill presentment services, not bill payment services, at the outset. It proposes to provide some basic "switching" capabilities, which is but one aspect of the more complete online billing solution provided by CheckFree. The exchange is not planned to be in full production until next spring and it is unclear what value proposition they can offer billers given their relatively LIMITED distribution and LACK OF TRACK RECORD. We also doubt the consortium will invest the significant sums required to build a high-quality, scalable transaction processing system. Sell-off Overdone. Given the timing, lack of details, and limited nature of the proposal, we think the market's reaction to the news is DRAMATICALLY overdone. We believe CheckFree enjoys a significant head start and has shown the willingness to invest heavily to best position itself over the long term. CheckFree does not need to own a majority of the online billing market to grow into a highly profitable company. What is The Exchange and Who Are It's Members? * The Exchange is a for-profit venture between Wells Fargo, Chase and First Union to develop an automated post office-like switch that will utilize a directory to receive bills from billers and distribute them to member and nonmember financial institutions for delivery to consumers. * These three institutions represent almost 300 million bills per year, 60 million consumers and small businesses, and 59,000 corporations and institutions. (Sounds like big numbers but they are actually small when compared to the totals that exist) Interestingly, these three banks have almost no geographic overlap. * These are three of CheckFree's largest customers (although they collectively represent less than 20% of the Company's {CKFR's} total revenue). These banks are customers of CheckFree's bill payment service for use with personal financial management software and in some cases through Web banking. First Union is one of two banks piloting CheckFree's fledgling bill presentment services and Chase was the first bank to announce support for it, but has yet to roll out the service to its customers. Why Are These Banks Doing This? Banks have been very successful in recent history at GIVING UP BUSINESS; from credit card processing, to mutual fund products, and checking services to brokerages. In order to stem this tide, the exchange is a defensive move from the commercial side of these banks to protect their cash management business, a business that is much more profitable than retail banking. Services like lock-bo processing are largely eliminated by electronic bill presentment. It is worth noting that the exchange may not be in the best interest of these banks' consumer groups since the service issues with bill payment appear largely unaddressed. (EXACTLY WHAT THE BOYS ON Silicon Investor have been saying!) Further motivating the banks is the incredible momentum of Internet based businesses in disintermediating off-line operations. CheckFree's Internet relationships have done little to quell these fears. However, the Company was incented to work with Internet players after the laggard pace of the bankers proved insufficient to generate any noteworthy demand. (In other words, the banks dragged their a$$es because they didn't want to give CKFR any more advantage then they already have) *With a vast majority share of the bill payment market and an early lead in the monolithic bill presentment market, CheckFree is in the middle of many competing radar screens. (In other words, CheckFree is the king of the hill, and everyone wants a piece of them)

To: jjs_ynot who wrote (7904)	7/11/1999 10:08:00 PM
From: jjs_ynot	Read Replies (1) \| Respond to of 20297

Part 3 of report: ragingbull.com Does The Exchange Compete With CheckFree And IF so How Does It Compare? Yes, but not completely. The exchange competes because it will atempt to sign up billers to use it as the method to publish bills to consumers. It is less of a direct competitor because its solution addresses only one piece of the puzzle. CheckFree's provides a full, end-to-end service for electronic bill presentment solution. While the exchange's solution will be a simple message switch, CheckFree's e-bill will provide billers with full customer care (end-user service), payment tracking, reporting, and one-to-one marketing capabilities. Consequently, billers and presenters (like banks) will be saddled with the reporting, and one-to-one marketing capabilities. Consequently, billers and presenters (like banks) will be saddled with the customer service issues when, not if, things go awry. Since the bill will go through multiple parties, tracking what happened to a bill or payment will be very difficult, and expensive task that will put the bill payer customer at risk for that bank. The exchange will attempt to offer only bill presentment in the near-term, not bill payment services. CheckFree's bill payment services, which allow the ability to pay anyone, are currently used by the exchange's founders and they will continue to do so for the foreseeable future. The biggest risk to CheckFree is if the exchange were able to develop an electronic payment mechanism for those bills that they present electronically. Many, many players (EDS, Integrion, VISA, and Intuit #, to name a few) have tried and failed to come close to CheckFree's functionality and service quality. CheckFree also benefits from its leadership position. CheckFree is the clear leader in the bill presentment market, as it holds contracts with 50 of the top 150 billers and has 21 billers running live on its e-bill system, delivering bills to 20 institutions. In addition, the Company has over 1,000 biller relationships through its bill payment service. Finally, CheckFree has signed a deal with Yahoo! (#) and we believe will sign the other major portals in the very near future. It would be nearly impossible for a national biller to decide against using CheckFree's bill presentment capabilities if only because of its enormous distribution capabilities. How Does CheckFree Respond To The Exchange? By continuing on the strategy communicated prior to this announcement that is focused on building adoption of online bill payment and presentment by enabling/incenting billers and payors. CheckFree's plan calls for spending $50 million to subsidize consumer offers to try online bill payment, to subsidize implementation costs to get 100 billers up and running by the end of fiscal 2000, and bolstering its systems to include the features, support, and processing structure to support the increased demand before it arrives. It's goal is to reach 100 million consumers and increase its end users to five million. CheckFree stated that it will work with the exchange to ensure interoperability, meaning that it will push bills through the Exchange to those banks' consumers, and it will accept bills from the exchange to distribute to the consumers of its other distribution partners. How Important Is Bill Presentment To CheckFree? In the first nine months of the current fiscal year, e-bill services generated less than $10,000 in revenue. From a fundamental standpoint, our near-term model is driven only by bill payment as driven by Web banking adoption and includes no assumed bill presentment revenue. Bill presentment revenue is only upside. That being said, our growth in online payment volumes assumes a modest level of success for online bill presentment services in order to spur adoption. Summary: This latest effort by banks to have a role in online banking further attests to the important and potential of online banking and bill payment/presentment. While the exchange may give CkeckFree another competitor, its members will also continue to be equally important customers, in another example of competition that the Internet seems to engender so well. If the Exchange is able to overcome the obstacles in its way, it's apparent minimalist service will likely appeal to the second and later tier billers which are more price sensitive, and thereby driving a new level of market segmentation. With its focus on the top 150 billers at this time, CheckFree more than has enough on its plate. (In other words, the banks will fight over the leftovers). The electronic bill payment and presentment market is an extremely large market and with over 75% market share, CheckFree will continue to draw competitors. However, its lead is unmistakable and it is clearly the best positioned to take advantage of the coming mass adoption of online banking as Transpoint is just getting to its feet and the Exchange is really nothing yet but a concept (albeit well backed). Finally, CheckFree is also partnering with leading Internet players to further drive online banking. Piper's 12 month Price Target? $75