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Technology Stocks : iVillage (IVIL) -- Ignore unavailable to you. Want to Upgrade?

To: AlienTech who wrote (405)	11/6/1999 10:34:00 AM
From: John Carragher	Read Replies (1) \| Respond to of 598

iVillage (IVIL) 27 1/4 +3/4 : iVillage is practicing the ethics of the last wave of the internet (which we believe is starting to end), with its press release announcing earnings. Those ethics put all of the emphasis on membership rates, page views, and traffic, rather than revenue and profitability. Increases in memberships and traffic have always been viewed as good, but only because those trends are associated with future revenues and profits. iVillage has actually done a better job than many net companies at generating revenues out of their traffic. But they still have a huge problem financially: the burn rate. Marketing alone exceeds revenues. They are losing $20+ million a quarter, $28 in the latest quarter, $63 over the last nine months. They only had $55 million in the bank, as of September 30, meaning they would have run out of money in less than six months. No surprise that the company filed for a secondary offering on October 14, closed it on Wednesday, to raise $75 million. But at this burn rate, $75 million may not be enough to reach profitability. To cover losses of $20 million a quarter, at a 50% gross margin (which would be an improvement), they need to push revenues to $40 million a quarter in a less than a year. Is that possible? It would be a quadrupling of revenues; currently, they tripled revenues year-over-year, but that includes acquisition revenues. It is a real tough challenge. No surprise that 10% of the secondary offering came from existing shareholders. But iVillage needs to prove it can ramp the revenues, sans acquisitions, at that kind of rate. Who would buy iVillage? We confess to not having a solid answer. At $600 million+ price tag, only someone with a desire for the women's market, a high stock currency, and strong cash flow could absorb it. The Venn diagram overlap of those characteristics leaves few players. But women still spend the majority of all shopping dollars (is that still true on the net? - can't find any data on it), and somebody, somewhere, may find iVillage's community of women appealing. But judging from today's press release, iVillage still thinks that the internet game is one of future promise, when, in fact, it is shifting towards a focus on profitability, largely due to Amazon.com's conference call this month. iVillage now stands at a crossroads: it must ramp revenues towards profitability at a high enough rate that another secondary isn't needed. The ability of iVillage to sell during Christmas time may be the critical factor on which it is judged, and that will be known in just three short months. High traffic, increased membership, and page views won't mean much in Q1 if the revenue curve isn't really high. - RVG