AGIL=B2B............
B2B, where are ye?
By Peter D. Henig
Redherring.com
September 10, 1999
"Fortune 1000 companies have just finished spending a
shitload of money on IT [information technology] and
are only now getting around to extending the
automation of the enterprise," says Brian Rutberg,
director of technology investment banking for Warburg
Dillon Read.
Mr. Rutberg's thesis, that large
corporations are basically still
slow and pudgy when it comes to
implementing cutting-edge
technology, helps answer a
fundamental question regarding
the tardiness of
business-to-business e-commerce
stocks: if the Web is so hot, why
are B2B stocks so late to initial
public offering?
You didn't see such lollygagging when it came to
business-to-consumer (B2C) companies searching for
investment bankers to take their money-losing,
market-share grabbing, top-line growing businesses
public. Even a dog stock like Theglobe.com (Nasdaq:
TGLO) floored it when it came to putting itself in the
IPO pipeline, as compared to the few, if any, pure
B2B plays that have ventured into public markets.
Ariba (Nasdaq: ARBA) and Commerce One
(Nasdaq: CMRC) have sallied forth on the B2B
infrastructure side, and Chemdex (Nasdaq: CMDX)
and VerticalNet (Nasdaq: VERT) have taken a whack
at Wall Street sponsorship as first movers in B2B pure
plays; but that's about it.
Yet, B2B could finally be poised
for a breakout.
As Stephen Sigmund, analyst with
Dain Rauscher Wessels, puts it,
"The aircraft carrier has just
turned and I think you're going to
see a whole wave of things
happen in the B2B space in the
last half of 1999 and first half of
2000."
NEW SCHOOL
"In B2C it's marketing 101, with black-and-white,
tried-and-true rules,"says Dana Serman, Internet
analyst with Lazard Frères. "But in companies like
VerticalNet and Chemdex, there are a thousand
lessons they need to learn about a thousand different
marketplaces."
Such is the distinction between B2B and B2C, sectors
that, although cousins by birth, represent "completely
different animals," says Mr. Rutberg.
The reasons for the delayed implementation of B2Bs
are varied. Besides the traditional argument that big
companies are fat and lazy, analysts say that worries
over Y2K compliance and potential exposure to
security gaps have contributed to B2B procrastination.
However, the main reason why B2B e-commerce has
yet to really explode has more to do with inexperience
and uncertainty with a new way of doing business than
with anything concrete.
Says Mr. Sigmund, "Corporate legacy systems and ...
inertia have held back mainstream businesses from
becoming Internet-enabled, while fragmented
industries have barely even figured out how to
centralize themselves offline, let alone online."
Put another way, it is easier to sell books on the Web
than it is to extend enterprise applications in a seamless
way that would include a company's or industry's
back-end systems, supply-chain management
expertise, and a spiffy new e-commerce model.
TURNING TIDE
For all of the delay, however, the B2B story is finally
coming together -- albeit far more slowly than B2Cs
did, and likely with far less mania.
"Every sector of the economy should become
Internet-enabled; the issue right now is just the
complexities of each market," says Mr. Serman. "Can
you build an online version of Staples, and, if so, how
fast?"
According to a survey conducted by management
consultants PRTM, fully one-third of companies
surveyed expect e-business channels to account for 20
percent or more of their revenue next year. And core
technology holdings like Cisco Systems (Nasdaq:
CSCO) or Dell Computer (Nasdaq: DELL) are
surpassing that expectation by quickly building their
online businesses, making the tech sector's market
leaders possibly the best Internet plays out there for
B2B e-commerce.
In fact, say analysts, B2B stocks -- if ever more than a
handful emerge -- may finally bring a quantifiable
measure of sanity to Internet valuations. According to
Mr. Rutberg, since B2Bs will be dealing with a select
group of customers who will have clear reasons for
automating the supply chain, the path towards Internet
profitability for this nascent group might be far shorter
and clearer than for the still-foundering B2C sector.
OLD STANDBYS
That's not to say that insane valuations won't appear
for a few of the more unique and industry-defining
B2B plays. For example, Ariba, the new market
leader for Internet-enabling purchasing systems for
Fortune 1000 corporations, has been a huge hit on
Wall Street, turning a 300-percent IPO gainer into
even further rewards as its stock soared to a $6 billion
market cap. And Mr. Sigmund still rates the stock a
Strong Buy with a price target of $200, representing a
110 times multiple of estimated calendar 2000
revenues of $82 million. Why is Ariba the hot hand of
B2B e-commerce? Because like any of the B2C
superstars, its projected annual revenue rate could
grow by 75 percent, its market for signing up more
corporate customers is huge, and its business model --
connecting suppliers with buyers in corporate
America's food chain -- is eminently understandable.
VerticalNet and Chemdex, on the other hand, although
successful enough on their IPOs, now find themselves
having to convince investors to stick with them in
businesses most retail traders don't see -- like
chemicals and wastewater treatment -- and most
institutional money managers don't understand.
Which leads investors back to those stellar performers
they've kept in their portfolios for years. Investors
might suddenly be considering these as B2B Internet
plays. Cisco, Dell, Oracle (Nasdaq: ORCL), and SAP
(NYSE: SAP) are only a few of the tech leaders who
have Internet-enabled their businesses while
streamlining their corporations onto the Web and who
are actively involved in setting up vertical exchanges --
think eBay (Nasdaq: EBAY) for the plastics market --
to bring the Net into their industries.
"With B2B stocks, there's a little more proving time
but a hell of a lot more staying power and a hell of a lot
less risk," says Mr. Serman. "As a result, they are
perhaps the safest Internet bets of all."
And from the yahoo threads:
"The Stock Is Going To Moving Up
by: Lev_3
40 of 70
The momentum crowd started to pile into this stock today. With the quiet period ending next week, I would
look for more volatility and higher highs over the next several days. If the market holds, I would look for
stock to go into the $80-$90 range, if not higher, by the end of next week.
Remember, this stock has a very small float. Any movement in price will exagerated because of the relatively
small amount of shares available for trading.
If the price runs, expect to see alot of shorts showing up here knocking the stock. Don't buy any of it. They
are going to get squeezed like hell over the next two weeks.
As always, do your own research,
Level 3 " |
