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Strategies & Market Trends : Gorilla Game Investing in the eWorld -- Ignore unavailable to you. Want to Upgrade?

To: Teflon who wrote (357)	9/17/1999 4:36:00 PM
From: gdichaz	Respond to of 1817

Teflon: Seems like a good idea to me. You have my vote. Cha2

To: Teflon who wrote (357)	9/17/1999 5:01:00 PM
From: Brian K Crawford	Respond to of 1817

Subj: NetStock! by Steve Harmon 1999.09.17 CMGI vs. ICGE, Unscrambled Date: 09/17/1999 4:34:12 PM Eastern Daylight Time From: steve@e-harmon.com (Steve Harmon) Sender: netstock-report-admin@listserve.com To: netstock-report@listserve.com ___________________________ e-harmon.com's NetStock! by Steve Harmon ceo of e-harmon.com "for the internet investor" e-harmon.com ___________________________ Shortly after going public a few weeks ago Internet Capital Group (ICGE) surpassed CMGI (CMGI) in market value. September 16 ICGE was $9.3 billion market cap vs. CMGI's $7.8 billion. Justified? Observers tossed up the usual buzz words and said ICG was more business-to-business. Let's unscramble the alphabet venture soup here and see if there's anything other than a noodle tease at play here. Company CMGI Internet Capital Ticker CMGI ICGE Mkt cap $7,786 $9,295 TTM sales $148 $6 TTM earnings $56 $32 Ratios Mkt cap/sales 53 1,583 Mkt cap/earn 140 289 Estimated company/all assets value* $11,250 $8,750 Number of wholly-owned 45 35 or portfolio companies Harmon's estimated value gap between 250 250 PMV and public 69% 106% note: pmv=private market value or what each firm's assets could be worth fairly valued ____ While business-to-business is hot and should command a premium as a sector, that doesn't mean that underlying valuation and potential can be ignored, or that ICG wins by marketing. We can pick apart each of the firms' portfolios but rather than play "dot-com" what ifs we can use a statistic approach combined with historical investment acumen to determine a broader based view of CMGI vs. ICGE. On a generic $250 million per unit the value adds up quickly for both firms yet shows. Not just a factor of the number of investments, however, what each firm has done in the past 4 years also matters. My analysis indicates that taking CMGI's operating and investments all together could be valued at my estimated $11.25 billion. Plenty of B-2-B in there and B-2-C (consumer) also. The key difference is platform and track record. CMGI has pulled off stadium-cheering moments with Lycos (LCOS) and GeoCities (now part of Yahoo). It still owns 18% of LCOS. Now consider also AltaVista, one of the top sites and services in the world for Web users, which CMGI just acquired from Compaq. It ranks in the top 10-12 any given month according to Media Metrix. CMGI owns about 80% of Engage (ENGA), with a market cap of $1.6 billion. Between AltaVista and Engage I find $3.6 billion of value. Half what CMGI trades for and we haven't discussed its 40 more investments. Focusing on ICG, using a generic value per each of its 35 investments I come up with $8.75 billion valuation for ICGE. Which means that September 16's market cap was a 6% premium to what I think ICGE could or "ought" to be valued at. Again, this median public/private market valuation factors some stars and duds in its portfolio. Both firms are portfolio driven with quarterly results that make predictions meaningless on the revenue side. Whatever the market mood for IPOs, acquisitions and mergers have more direct bearing on CMGI and ICGE, with more influence on the latter one. ICGE announced September 16 a loss of $11 million for the quarter ended June 30. Unpredictable. For example, 2Q 1998 ICGE posted $6.7 million net income when it realized gains on investing in VerticalNet (VERT). VERT's the only thing ICG has to its credit so far, and I've always believed that the promise of VerticalNet and the delivered results have been two different things. VERT is a home run and feather in ICG's cap but not a grand slam in the industry. In other words, VerticalNet is not yet a hit in its sector as measured by revenue and users. VERT's market cap September 16 hit $1.1 billion. ICGE owns a small piece. Even if it owned it 100% that's still not big enough of a blip. GeoCities, in contrast, was a grand slam and Lycos was a paltry million dollars parlayed into several billion by CMGI. Millions of users each. Engage is a more recent example of value created. More than buzzwords or following the herd, the numbers tell the story so far, just not in the market caps being reflective of the results so far. Both have potential but soup to nuts it's time for alphabet soups CMGI and ICGE value gaps to get unscrambled. *** may be posted or published for non-commercial use, 100% intact with attribution *** _________________________________________________ (c) 1999 e-harmon.com, inc. This analysis may be shared for non-commercial purposes 100 percent intact, with proper copyright and attribution. Disclaimer: e-harmon.com does not make specific trading recommendations or give individualized market advice. Information contained in e-harmon.com's NetStock! is provided as an information service only. e-harmon.com recommends that you get personal advice from an investment professional before buying or selling stocks or other securities. The securities markets and especially Internet stocks are highly speculative areas for investments and only you can determine what level of risk is appropriate for you. Also, users should be aware that e-harmon.com, its employees and affiliates may own securities that are the subject of reports, reviews or analysis in NetStock!. Although e-harmon.com obtains the information reported herein from what it deems reliable sources, no warranty can be given as to the accuracy or completeness of any of the information provided or as to the results obtained by individuals using such information. Each user shall be responsible for the risks of their own investment activities and, in no event, shall e-harmon.com or its employees, agents, partners, or any other affiliated entity be liable for any direct, indirect, actual, special or consequential damages resulting from the use of the information provided. _________________________________________________ To SUBSCRIBE please visit e-harmon.com To UNSUBSCRIBE please send a blank email to unsubscribe-netstock@e-harmon.com

To: Teflon who wrote (357)	9/17/1999 5:10:00 PM
From: gdichaz	Respond to of 1817

Briefing.com view. For what it is worth. Sometimes this outfit has good reporting and ideas, other times not. For info: 13:53 ET ****** (Daytrader) : Momentum theme du jour: B2B. As visibility has improved over the past 6-8 months, B2B (business-to-business) stocks have supplanted B2C (business-to-consumer) as the vehicle of choice for participation in the e-commerce explosion. These market newcomers are where the B2C companies were 18-months ago -- logging triple/quadruple digit growth and possessing modest relative valuations and nimble stocks (i.e. small floats)... Briefing.com began following this group in April of last year, when we highlighted BroadVision Inc (BVSN 115 15/32 +9 19/32) in the "Undiscovered Internet Stocks" Series (see Story). BVSN shares have soared 500% since our first report... We followed up that piece in July of this year with a discussion of the e-commerce market opportunity and several of the companies addressing it (see story)... Today, BVSN, along with several recent initial public offerings, being bid up on heels of bullish comments by Goldman Sachs. The firm is bedazzling investors with major study on the B2B sector. In report, Goldman estimates that the B2B market in the U.S. will grow to approx. $1.5 trillion by 2004, from just $39 billion in 1998. The quantification of the opportunity in the B2B space has ignited a wave of buying in sector stocks, the majority of which have IPO'd this year. Benefitting from the report are names like Commerce One (CMRC 95 3/8 +15 1/8), Ariba (ARBA 132 +8 5/8), VerticalNet (VERT 327 1/4 +3 7/16), PurchasePro.com (PPRO 25 5/8 +1 5/8) and BroadVision (BVSN 15 15/32 +9 19/32)... According to Goldman, the industries most likely to embrace B2B solutions are: Computer Hardware and Software; Aerospace/Defence; Electronics; Chemicals; Motor Vehicles and Parts; and Medical Equipment and Transport... Companies Goldman Sachs expects to be biggest beneficiaries of B2B e-commerce include the aforementioned Ariba Inc (ARBA) and VerticalNet (VERT), along with software giants Oracle Corp (ORCL) and SAP AG (SAP). E-healthcare services company Healtheon also made the list. - D Cha2

To: Teflon who wrote (357)	9/21/1999 6:13:00 PM
From: StockHawk	Read Replies (3) \| Respond to of 1817

A Godzilla Game Cheat Sheet (taken from chapter 12 of The Gorilla Game) The Internet is a "dramatically discontinuous innovation". It will be used to make existing institutions more productive and in some cases to "do away with them altogether." A "global reengineering of inefficient markets." In looking at the business-to-consumer market the book divides people into shoppers (those who love to shop) and buyers (those who hate to shop). For the buyers "the Internet is a godsend" and for the shoppers, who can browse widely and engage in communities of like-minded individuals "There has never been anything remotely equivalent to the power and scope of this offer" But, "For pure opportunity to reengineer inefficient markets, ...there is nothing to compare with the business-to-business sector." They see a class of businesses which they call "transaction exchanges" that will establish "many- to-many" markets. eBay is using this model for sales between individuals. Other companies will use this model for sales between businesses. The relationship based one-to-one selling of brokers and the like is in trouble. The book identifies 7 competitive advantages that transaction service business can have. How they measure up with regard to these advantages is a key to evaluating who the leaders will be. The 7 competitive advantages are: 1. Switchboard/exchange position: the advantage enjoyed by companies that position themselves as transaction brokers (think of eBay or Priceline), especially in business-to-business. 2. Brand: the ability to attract new customers (Amazon or Yahoo or, again eBay) 3. Value chain position: Ability to control access, and to derive revenue from it. Might be called portal power. (AOL or Yahoo or VerticalNet). 4. Specialization: very specific niche marketing is possible on the Internet and a site can develop a community of participants. (VerticalNet). 5. Stickiness: the ability to keep a customer at a site with the goal of turning visits into sales. 6. Low-cost business design: A double edged sword - lower cost structures allow lower prices which draws customers, but as low price leads to commoditization no one can earn superior returns. 7. Experience curve: The ability of a early mover into a space to leverage their experience into competitive advantages (E*Trade). Not all the 7 have equal weight. The first is most important, the last two least important. Some final notes: Godzilla investing is entails much more risk than playing Gorilla games. Also, it is much better to select individual stocks based on the 7 criteria than to buy baskets of stocks, as is done in Gorilla games. StockHawk