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Technology Stocks : Exodus Communications, Inc. (EXDS) -- Ignore unavailable to you. Want to Upgrade?

To: Eric who wrote (1534)	11/10/1999 12:45:00 PM
From: The Other Analyst	Read Replies (2) \| Respond to of 3664

Perhaps I did not make clear the distinction between projected revenue and past revenue. The stock price reflects expectations. So it is not that the market is saying Oracle's nearly 10 billion of revenue (trailing 12 months) is worth $80 billion plus in market cap. The market is saying it expects that Oracle's revenues will grow to, let's say $100 billion, for a ten-fold increase. Then when you calculate what the eps would be and the dividends, and put a value on the stock that reflects growth thereafter, and discount back at an appropriate rate to reflect the risk of the asset, then the present value is around $58 per share of ORCL. When I referred to EXDS having $1 billion in revenues, I was talking about a projected number. For the last 12 months, the EXDS revenues are only $161 million. So EXDS has a market cap to trailing revenues of 47.2 times. ORCL has 9.58. MSFT has 23. You say EXDS is growing faster than msft and orcl and therefore should be valued at a higher multiple of sales. No argument from me on that point, and the market agrees also. My point was in response to an earlier post that had said in effect,"gee, Exodus could get to $1 billion in revenues, isn't that great?" Here is the exact quote: Sure $6 billion [market cap] sounds like a lot but extrapolate out the revenue growth to 2000, 2001, 2002, give or take a couple of acquisitions and industry consolidations down the road. Surely it's not inconceivable that EXDS could one day do a billion in revenue. The market ALREADY expects it to do far FAR more than that. The market already knows that the growth prospects for the Internet are enormous. It is not going to necessarily reward investors for simply having that insight. I was also asking about what kind of margins EXDS will sustain. My guess is that MSFT and ORCL should sustain higher margins in the long-term than EXDS. Although what they have now has some real proprietary advantages, I don't see what they have that will allow higher margins after the Internet has matured more in say 10 or so years.