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

To: Mike Buckley who wrote (603)	11/10/1999 4:03:00 AM
From: Bruce Brown	Read Replies (1) \| Respond to of 1817

Mike, You posed two good questions which I think can easily be answered with more questions!!!! Although we need to define a couple of key points that I have been hoping we could get a grasp on together. The key points actually involve asking more questions of course. They are: Is this B2B space a Godzilla Game? If it is not a Godzilla Game, do we buy a basket of stocks? How do we segment the portion of traditional companies pre-B2B now that they have entered B2B? Such as Oracle, i2, Siebel, IBM, MSFT, SAP, PSFT, etc... ? How do we segment the various forms of B2B into the proper categories? Mike asked: Is the B2B industry undervalued? If you read any report on what is spent today in terms of B2B dollars as opposed to what will be spent one, two, three+ years out from now - you get the sense that tremendous growth exists. Keep in mind, most reports are not talking about the money corporations are going to spend on the software/solutions technology to enable B2B transactions, but how much business in $$$ amounts will be transacted. This really jumped out at me last night listening to John Chambers matter of fact declamation - combined with excitement in the tone of his voice - when he said how much their Internet transactions have increased year over year. Huge amounts. Cisco, Intel are the two that lead this category, I believe. Dell is certainly in the top few as well. I'm also struck by Geoff Moore's thoughts that the dominant software/solutions technology providers going into the transition to Internet will most likely emerge as the dominant technology providers once they have completed the transition. This transition includes all these alliances that we are seeing. There are pockets of value and the alliances being formed are real efforts to jockey for position so that the players involved can offer a substantial end-to-end solution for their customers which will save them money - lots of money. Those with the best sales pitch strengths will benefit in their sales encounters. Remember, corporations are drooling with the thoughts of saving millions and millions of dollars by transacting portions of their traditional business encounters via B2B rather than using the more traditional business practices which have been the norm for the past 50+ years. We know it is a hot sector with hot prospects that make a lot more sense to 'traditional' investors as 'pick and shovel' type investments. This, as opposed to the Godzilla Game of AOL, eBay, Amazon, Yahoo! and the like. Although eBay is a strong case for bringing many to many via the Internet that, IMO, holds the best business model of the four. As mentioned by the excellent reports posted on this thread, there are a lot of avenues to play this B2B industry. As usual, the money flies in way at the beginning or before 'kick off' to be able to take advantage of the growth that will take place. In that respect, I don't think we can say these stocks are over or undervalued. Oracle, IBM, Siebel, i2, SAP, PSFT, MSFT, etc..., have already been playing this B2B game. It's not as 'new' as we think it is in terms of Internet years. Ha! ....is it possible too many dollars chasing too few companies, resulting in overvalued companies? Of course this is possible. However, I don't think it is because we are going to see a myriad of yet unknown new companies run into this space and join in the 'fun'. I think most of the players are here and scrambling to get into positions. Hence, the alliances. What's not known at this point is - with all of the hoopla about how much business to business will be transacted in the future over the Internet in dollar terms, what is it going to mean for the companies providing the solutions to corporations, large/medium/small businesses to transact these dollars. How much revenue is this going to bring in for them and how can we apply this to valuations. All we can do is continue to monitor the 10-Q's and 10-K's of each company that we are interested in to see what additional growth it is providing quarter after quarter. I guess that's how we 'do the math'. It's an equation that will take many quarters to solve - or even to attempt to solve. I have established my little corner of the earth portfolio of B2B plays in a 'basket' of sorts at this point. I feel more comfortable with the big established companies that derive most of their revenues from other sources outside of B2B, yet they are forming strong alliances and moving into B2B via transitions of their in-house product offerings. I'm going with the companies that have the strongest sales forces in hopes they will lead the revenue growth figures for B2B. For me, the smart move is to contribute a small portion of my portfolio to this segment so that I too, as an investor, can benefit from the companies that will help save the world's corporations oodles and oodles of dollars going forward. Then again, many of you know my desire to remain diversified and this strategy is not recommended for all. I just don't know a better way to catch the B2B play at this juncture in time. BB

To: Mike Buckley who wrote (603)	11/10/1999 7:33:00 AM
From: Jill	Read Replies (1) \| Respond to of 1817

Questions about valuation: a consortium is being formed: Internet research group formed to counter e-hype NEW YORK (AP) - Representatives from leading Internet firms are forming a research group to counter e-hype. The Internet Policy Institute wants to warn policy makers, businesses and the public about Internet services that tout themselves as the next best thing. The group hopes to provide independent research to balance self-promotional claims. Membership includes executives from rivals Microsoft Corp (NasdaqNM:MSFT - news). and America Online Inc (NYSE:AOL - news). The new institute, announced Tuesday, will research such topic as e-commerce, taxation, law enforcement and democracy. "If you do a survey of everybody's expectations, you get numbers that are probably not realistic," said Esther Dyson, interim chairwoman of the Internet Corporation for Assigned Names and Numbers, the group managing much of the Net. George Vradenberg, America Online's senior vice president for global and strategic policy, said understanding the Internet's social and economic impact is important. "It is large enough to matter, he said, "and young enough and early enough in its stage for us to shape it." Jim Barksdale, former chief executive of Netscape Communications Corp., noted how little hard data is available for policy makers tackling critical decisions. The initiative brings together companies with competing agendas. Microsoft has had spats with both AOL and Netscape. A browser war between Microsoft and Netscape led to a judge's finding Friday that Microsoft is a monopoly. Kimberly Jenkins, president of the new group, said the diverse membership will help keep the research independent. The board will also include representatives from academia and nonprofits. Funding will come from foundations and corporations, including AT&T, MCI Worldcom, AOL and the Nasdaq stock exchange (AMEX:QQQ - news). The group, which will have offices in Washington, will not lobby lawmakers or endorse bills, officials said. Bob Herbold, Microsoft's chief operating officer, said it will instead focus on promoting an Internet where users have "the best opportunity to take advantage of this incredible capability." ¸ The Canadian Press, 1999

To: Mike Buckley who wrote (603)	11/15/1999 2:42:00 PM
From: Martin Rasch	Read Replies (1) \| Respond to of 1817

Valuation and B2B: thanks for your deeply appreciated input. Following your advise, I spent some time on the Fools pages i.e. fool.com and some related links. Even for someone who has already spent some time with investing and DD it was very informative and given that I have heard most of the stuff already it was a vulnerable repeat exercise. Highly recommended to everyone who is not a full time pro - unlike UF .-) But, trying to apply the rules to your initial questions, Is the B2B industry undervalued? If so, is it possible that there are too many dollars chasing too few companies, resulting in overvalued companies? It became clear to me that things are more complex than they originally appeared. The more I dug the more questions arose, finally leading to the ultimate one: Is there a so called B2B industry? After studying the two most popular representatives, ARBA and CMRC I doubt it. Here is why: These two companies have impressive growth rates based on complete different business models ARBA mainly sells software: Ariba ORMS ariba.com CMRC is offering a virtual marketplace (Marketsite.Net) The fee for participating in MarketSite is transaction based. They charge a minimum fee to their suppliers every time they receive a purchase order from their participating customer(s). Fees range from $.25 to $2.00 and are based on volume Frankly, I see CMRC more in e-Commerce than in B2B. By further examine this terrain I had a stopover at ITWO. This company employs about 10 times the staff of the formerly mentioned and generates about 10 times their revenues but Mr. Market does not grant her a adequate market cap. Why the hell that? What can the other guys do what i2 can't? I really don't know - they offer a integrated B2B system within their application and have installed a virtual marketplace as well tradematrix.com They have more suppliers than the others have and they are sitting on a broader base of current customers. But also i2 has it's problem because their "value chain-application" is in jeopardy since the big ERPs are going to integrate it to their solutions. Despite of this I see no proprietary nor high switching costs in the B2B area. There is no reason why one could not use different marketplaces simultaneously. As a conclusion I would say that the tornado-like demand for B2B solutions will make the strong ERPs even stronger. Should be a reason to load up more SEBL :-) But for those who want to ride the hype find enclosed excerpt of the 10Ks. Since CMRC comes from a lower base it will be easier for her to maintain a outstanding growth rate for a while and surprise the street in a positive way. Long term, the current market cap of both is not reasonable IMO. ITWO should be the safer play (though I doubt that safe is the appropriate term in this context) ARBA CMRC ITWO Revenues (mrq 4) 68.564 41.452 585.184 sales growth (mrq vs qtr. 1 yr. ago) 266% 1385% 55% average quarterly growth (last 4 qtrs) 39% 110% 12% Market Cap 8.933.660 7.378.440 5.742.740 Price/Sales (mrq 4) 130 178 10 Employees 221 244 2244 Revenues / Employee (mrq * 4) 310 170 261 Other Companies to observe SAP SAP enterprise resource planing PSFT PeopleSoft enterprise resource planing ORCL Oracle enterprise resource planing BAANF Baan enterprise resource planing SEBL Siebel enterprise resource planing MANU Manugistics supply chain LGTY Logility supply chain BVSN BroadVision e-Commerce OMKT Open Market e-Commerce SILK Silknet e-Commerce It would be great if someone picks up this stick and throws it back with some commentary and/or proves me wrong with my conclusions. Having a great time being here Martin