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Technology Stocks : NetZero Inc-(NZRO) -- Ignore unavailable to you. Want to Upgrade?

To: Brasco One who wrote (154)	10/3/1999 3:46:00 PM
From: Glenn Petersen	Read Replies (2) \| Respond to of 513

An interesting article from The Industry Standard: thestandard.com Media Pegs NetZero a Loser and Its IPO Zooms No wonder the media is a neurotic mess. After cheerleading for scads of dubious dot-com businesses, financial writers finally found their collective spines when it came to NetZero, the free ISP service. Spotting a business plan full of holes and an unworkable premise, they roundly panned the company. But their skeptical observations were drowned out by the sound of investors stampeding in and scarfing up 10 million shares of NetZero on opening day. Here's how NetZero works: Web users fill in a form describing themselves and their demographics, and then agree to watch a parade of banner ads in exchange for free Net access. In the wild and woolly world of the Net, companies have gone far with a lot less. But in the light of day, NetZero's premise starts to look really bad really fast. For starters, it snags half its revenues from just two contracts, one a cobranding contract with LookSmart and the other an ad agreement with AdSmart. That's always risky, Individual Investor Online's Craig Schneider pointed out, but in this case, as the companies grow into big-time clients, they can push NetZero around or leave it all together. Analysts were unenthusiastic about the prospects of free access. "[W]e're not placing tremendous faith in the longevity of this business," the Yankee Group's Emily Meehan told Schneider. "How many advertisers really want to hit the cheapskates?" chimed in Morningstar analyst Pat Dorsey. A more important question is whether the pennypinchers are even logging on. By Aug. 31, NetZero had 1.68 million users, but only 891,000 used the service all month, ZDII's Larry Dignan noted. Where were the others? Probably using other ISP accounts, the company sheepishly admitted. Dignan called NetZero a second-string ISP that could be a key player in pressuring other ISPs' profit margins. Analysts have twice downgraded AOL (AOL) partly as a result of the free spree. But MSN bucked the trend when it announced plans to raise its monthly fee to $21.95. Investors didn't care. NetZero's stock opened at $16 and trader enthusiasm drove it up another $13 during the day. The media kept up the anti-free campaign. After the IPO, Redherring.com's Tom Davey pointed out that NetZero's real potential and stock value is as a takeover target. A merger with EarthLink and MindSpring is a possibility, but a buyout by a big daddy like AOL is more likely. By week's end, even AP had jumped on the story. "[T]here were strong signs that the newcomer's main product ... may not be the wave of the future after all," David Kalish filed in a report for the wire service. But investors would have none of it. On Thursday, NetZero's stock closed at $26.