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Technology Stocks : DRIV (DIGITAL RIVER). Get in on internet IPO. -- Ignore unavailable to you. Want to Upgrade?

To: M. Frank Greiffenstein who wrote (2739)	10/25/1999 8:02:00 PM
From: David Browning	Read Replies (1) \| Respond to of 3198

Right, Doc, the booking approach is weak, especially as it varies by product...... A gross margin of 19% is low for a manufacturer, not so bad for a distributor. Here, it should be ok, with volume, as DRIV has no investment in factory or inventory/receivables to finance. DRIV probably should recognize only its software rake (gross profit) as revenue, particularly since that is the way it treats shareware and commerce bridge sales. That is, those businesses have virtually no cgs. Had they done the same with software from the beginning, their gross margins would be fabulous and everybody would be happy, except that "revenues" would be around $4 million this quarter. Obviously, somebody decided on grossing up the revenues, back at the beginning, in order to get some attention. More importantly, if the increasing weight in favor of shareware and commerce bridge brings the gross margin up to 20% + over the whole line, the fact that they have little asset investment beyond computers should see operating profits kick in nicely once revenues, as mixed, approach a $200 million run rate (mid-2000?). From there on, it should get very interesting, esp. if growth favors the shareware/commerce bridge activity. We should probably just focus on the gross profit line's growth, and stop obsessing about gross margins in a business in which they are inconsistently derived and essentially meaningless in the first place. As far as BYND is concerced, it's beyond me! (with their margin structure and advertising/promo costs). David

To: M. Frank Greiffenstein who wrote (2739)	10/25/1999 8:29:00 PM
From: Charlie Smith	Read Replies (1) \| Respond to of 3198

Frank: The PR says 19 v. 18.9% Comparison is against previous calendar quarter, not year over year. E-Commerce was supposed to eliminate many costs of goods and other expenses. "E-Commerce" has little or no effect on cost of goods, but instead reduces distribution and marketing costs and therefore boosts operating margins. DRIV hopes to sell at lower gross margins than B&M retailers, thereby offering a better value to consumers, but keep more as profit through lower sales and marketing costs. In other words, pass on some of their operating cost advantage, but not all of it. Charlie