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Strategies & Market Trends : LastShadow's Position Trading -- Ignore unavailable to you. Want to Upgrade?

To: Jeff Jordan who wrote (25145)	11/17/1999 3:23:00 PM
From: AlienTech	Read Replies (2) \| Respond to of 43080

Where is LS?? There was a 100K institutional buy of INIT. So something must have happened at comdex.. Either that or someone at the desk pressed the wrong button. Take out 18 and tomorrow it can try 20 again. Interliant Inc. Reiterated Near-Term 'Accumulate' at Merrill Princeton, New Jersey, Nov. 17 (Bloomberg Data) -- Interliant Inc. (INIT US) was reiterated near-term ''accumulate'' by analyst Henry Blodget at Merrill Lynch & Co. The long-term rating was reiterated ''buy.'' ML Report Summary: We believe 3Q 99 marks an important inflexion point in the Interliant story, characterized by increased topline momentum and a significantly strengthened market positioning. Interliant announced a solid quarter with the first signs that that the company's consolidation strategy is delivering strong organic revenue growth operating synergies. The company has spent the better part of 1999 acquiring strategic assets to fill out its e-business solutions portfolio. While it will take several quarters for the company to reorganize these assets under a unified brand and organizational structure, we believe FY2000 and FY2001 represent a ‘sweet spot' for Interliant. The $600 billion market for ASP e-business solutions targeting small and medium-sized businesses is doubling annually. And currently, management believes only three players -Verio, Concentric and Interliant – have critical mass and a compelling competitive positioning. We re-iterate our Buy rating. At 5x 2000E revenues with a long-term forecast revenue growth rate of 40%, Interliant represents the most value-oriented way to play this hypergrowth segment, in our view. Interliant announced 3Q99 revenues of $12 million versus our estimate of $11.5 million. We would highlight that the quality of revenue growth exceeded our expectations. Sequential growth was 13% and year over year growth was 600%. Organic revenue growth was up 13% versus our expectation for a flat quarter. Customer churn was low at 1-1.5% and average revenues per customer increased 13%, according to management. Acquisitions accounted for only $400,000 versus our estimate of $1.5 million. This trend marks an important departure from prior quarters where organic revenue growth was flat. EPS was ($0.37) per share versus our estimate of ($0.50) per share. The EPS upside in the quarter was driven by lower than expected sales & marketing expense and acquisition goodwill. Net losses were ($15.7) million versus our estimate of ($22) million. EBITDA was ($8.2) million, significantly ahead of our ($11.4) estimate. The upside in the quarter came from lower than expected sales & marketing expenses and lower amortization expense. Sales and marketing expenses totaled $5.2 million (43% of sales) versus our estimate of $8.2 million (71% of sales) . This was due in part to a late start on expanding the salesforce. Despite this, the company exceeded our organic revenue growth number, reflecting greater efficiencies in sales & marketing spend. Amortization of goodwill was $6 million versus our estimate of $8.7 million. This was due primarily to a mark-up of assets in acquisitions that were closed during the past three months as the company's initial estimates proved conservative. The company made significant process during the quarter in combining the operations of acquired entities. In finance, Interliant converted 17 out of 19 operating companies to a common financial platform. In human resources, 16 out of 19 were converted. In operations, the number is 18 of 19. And in billing it is 13 of 19. The direct sales force is currently selling across services. The company still needs to develop a common branding and marketing platform. The company announced strategic partnerships with Network solutions, IBM and Vivendi/Softbank during the quarter which greatly enhance the company's global e-business solutions capabilities. In particular, the relationship with IBM enables them to deliver a one-stop hosting solution which combines IBM hardware and software with Interliant's hosting and ASP capabilities. It will be jointly marketed by IBM and Interliant. And the company's announced joint-venture with a Vivendi/Softbank portfolio company seeds their first-mover advantage in Europe. The new joint-venture will benefit from the infrastructure and marketing assets of Cegetel (France's second largest network provider) and financial backing from Vivendi and Softbank. We expect to have greater visibility on the revenue upside from these partnerships as Q4 unfolds. Our estimates for 4Q99 and FY 2000. We are raising our revenue estimates for Q4 and FY 2000 to $16.1 m and $114 m from $15m and $92m. We are reducing our loss per share estimates for Q4 and FY 2000 to ($0.46) and ($2.40) from ($0.62) and ($3.14). For FY 2000, we have projected quarterly sequential organic revenue growth of 13%. Over the next 8 quarters, we would expect this growth to ramp to 20% and then peak. We have maintained our estimate of $27 million in acquisitions. We would note that ordinarily we do not include acquisition revenues in our projections given the uncertainty in the timing of these acquisitions. However, the company believes they are core to the story and that this reflects a realistic assumption. Our estimates do not include revenue contributions from @Viso which will be confirmed when the deal closes in Q499. @Viso is currently operating at a $1 million run-rate but looks likely to ramp to $3-5 million by Q4 2000. We have significantly cut our operating loss estimate for FY 2000 from ($65) million to ($46) million. This is due primarily to the fact that we expect sales & marketing expense to be flat as a percentage of sales. This is despite what we expect to be a 25% increase in headcount and a doubling of advertising expenditure