wow, great piece in small caps online. real thorough.. nice.
full text..
SMALLCAPS ONLINE LLC
1285 Avenue of the Americas, 35th Floor
New York, New York 10019
Tel: 212.554.4158 ? Fax: 212.554.4058
www.SmallCapsOnline.com
INVESTMENT RESEARCH
January 7, 2000
RECOMMENDATION: BUY
ACTV, Inc. (NASDAQ: IATV)
A Leader in Digital Television/Convergence Space;
HyperTV, Individualized Television National Events
and Digital ADCO to Drive 2000 Activities;
Reiterating BUY Recommendation
Market Data:
Exchange Symbol..............IATV (NASDAQ)
Price of Common Stock (1/07/00).....$35.75
30-Day Average Trading Volume......902,000
Shares Outstanding..............42 million
52-Week High/Low..............$51.75/$3.81
ACTV Corporate Information:
Address.......1270 Avenue of the Americas
.......................New York, NY 10020
Telephone....................212-217-1600
Chairman & CEO.........William C. Samuels
V.P. Finance................Ted O'Donnell
Summary Investment Considerations
Over the past year, ACTV has progressed significantly from a software company
developing its core technologies, HyperTV and Individualized Television, to a leading
digital media company that has successfully marketed its innovative technologies and
partnered with leading companies in the telecommunications and entertainment arenas. By
leveraging a technology and a rich patent portfolio that includes industry-leading
applications for digital television and the convergence of television and the Internet, we
believe ACTV is poised for significant growth in 2000 and beyond.
Since initiating coverage in December 1998, ACTV has started to be recognized as a leading
new media company and recently met our 12-month target price. Last month, ACTV filed for
a public follow-on equity offering being led by Credit Suisse First Boston with Bear Stearns,
Lehman Brothers and Salomon Smith Barney as co-managers (we encourage investors to
read ACTV's Form S-3 available through EDGAR). With the increased institutional investor
interest and ownership this offering will bring, together with bulge-bracket investment
research coverage, we think the share price will continue to appreciate from current levels,
particularly when investors become better informed of ACTV's current strategies with
respect to HyperTV, its equity-partner driven joint ventures: LMC IATV Events LLC (joint
venture with Liberty Media) and Digital ADCO, Inc. (jointly owned with General
Instrument), and the intrinsic value in ACTV's broad new media patent portfolio.
We are currently updating our earnings model, and expect to publish new numbers and a
new price target in 1Q00. We are reiterating our BUY rating and recommend purchase of
stock for those investors tolerant of the risks associated with small caps stocks.
Individualized Television
ACTV is revolutionizing television with its patented Individualized Television that allows
for the creation of interactive and customized content that responds to the individual
viewer's remote control entries. Individualized Television will first be marketed on a
national basis through joint ventures with Liberty Media and General Instruments.
ACTV, through its joint venture with Liberty Media called LMC IATV Events LLC, has
joined with iN DEMAND (formerly Viewer's Choice), the leading pay-per-view provider for
blockbuster movies and special events, to provide individualized national marquee
pay-per-view events. Viewers with a standard digital set-top box with the ACTV software
and a special remote will be able to order select pay-per-view events and seamlessly switch
through different real-time feeds of video, audio and other data. Subscribers will enhance
their entertainment by becoming their own director and choosing from the different feeds
that can include different views of the action, highlight packages, replay and stats.
One of the most exciting recent developments at ACTV and its second national priority is
the creation of Digital ADCO Inc. ("ADCO") with General Instrument, to develop and
deliver individualized and targeted advertising to viewers. General Instrument invested $5
million in ADCO (which is 51 % owned by ACTV) expanding on its already established
relationship. ADCO will provide a revolutionary type of advertising that is beneficial to
both viewers and advertisers. ADCO will provide means for television distributors to insert
advertisements into a digital programming stream without noticeable interruption. Specific
commercials will be delivered to viewers based on geographic and demographic information
or on purchase behavior. We feel that viewers will respond positively towards
advertisements that are specifically geared to them and that the advertisements will have a
greater impact for potential consumers. ADCO will be able to store information about
viewers' behavior that can be used by the advertisers to reach their target audience. ACTV
has also partnered with Fox Sports Net, who will roll out Individualized Television in select
regional areas.
We feel that the significant progress that ACTV has made during 1999 has established a
platform from which significant revenues can be derived for years to come. ACTV has made
considerable progress over the past year, expanding Individualized Television to a national
audience and creating a joint venture with General Instruments. We feel that this is only the
beginning of many different applications for Individualized Television from broadcast
television to game shows, music, news and educational programming.
HyperTV -- Establishing ACTV as the Leader in Convergence Programming
Last November, ACTV made its commercial launch of its patented HyperTV software in the
entertainment arena, establishing itself as the clear leader in the production of convergence
programming. First, HyperTV Networks and TBS brought "CyberBond" to viewers across
the country, providing an interactive experience for those watching TBS' "15 Days of 007."
ACTV has also announced that it will bring the first feature length interactive experience to
those who order Austin Powers The Spy Who Shagged Me. And, in a partnership which we
believe further validates both the HyperTV technology and consumer demand for
convergence programming, HyperTV Networks and MTV now offer continuous
24-hour/7-day convergence programming for The BOX Music Network. Initial consumer
feedback on HyperTV programming has been positive.
HyperTV Networks has formed relationships with key content providers including TBS,
Showtime (a Viacom company), MTV's The BOX Music Network and New Line Cinema (a
division on Time Warner), and we anticipate announcements of additional relationships and
programming events in the near future.
In November 1999, ACTV announced that it had acquired all of the assets of CatchTV
including the patented technology of "bookmarking," the ability to save addresses of Web
pages (URLs) that are related to TV programming. ACTV intends to incorporate the
"bookmarking" and other technology of CatchTV into its HyperTV experience. This
additional technology will allow viewers to visit the URLs before, during and after the TV
program airs, which benefits the viewers, program providers and advertisers. Program
providers will not have to worry that advertising pages will interfere with their content, and
viewers will not be overwhelmed by the amount of material displayed to them. The viewer
will be able to revisit the page without interrupting his/her HyperTV experience. Advertisers
will be able to capture additional revenues as viewers can return to the specific URL to
purchase and interact and not miss the program they wish to watch.
We believe that this is another key technology acquisition for ACTV, following on the
footsteps of the acquisition of the Wolzien Process technology and intellectual property
(see update 5/17/99), that will provide a more enjoyable, user friendly, and effective
HyperTV experience. ACTV's ongoing efforts to improve its technology demonstrate its
position as a leader in the interactive entertainment industry.
Conclusion
If all goes to plan, we expect ACTV to be marketing its follow-on public equity offering in
the middle of 1Q00. Due to its rich patent portfolio, its strong corporate partners, and its
multiple applications and streams of revenues, we feel that competitors of ACTV and other
companies positioned in the digital television space (such as Liberate, Wink, Worldgate
and TiVo) do not have nearly as much potential as ACTV. We are currently updating our
earnings model and should be releasing it in 1Q00. We continue to rate ACTV a BUY, and
recommend purchase of stock for those investors tolerant of the risks associated with
small caps stocks.
Risk Considerations
This section of the document is provided to remind potential investors to undertake a
prudent level of due diligence prior to making an investment in the securities of ACTV,
Inc. For a complete description of risks and uncertainties to ACTV's business, see the
"Risk Factors" section in ACTV's SEC filings, which can be accessed directly from the
SEC Edgar filings at www.SEC.gov on the Internet. Other potential risks include:
Market risk: Investors should consider technical risks common to many small-cap
stock investments, including liquidity levels, small float, risk of dilution, dependence
upon key personnel, dependence upon single products or technologies, and the
strength of competitors that may be larger, better capitalized and hold dominant
market positions.
Business risk: ACTV has limited experience in emerging business of interactive
television programming and Internet educational software and support. Many of its
products and services are in the early stage of commercialization. There can be no
assurance that ACTV's business or the markets in which it competes will materialize
or achieve the desired levels of revenues or profitability as expected.
Competitive risk: The entertainment and software industries are extremely
competitive, and many perceive the barriers to entry to be low. Added competition
could lead to price competition and lower margins.
For Additional Information
Please visit our website at www.SmallCapsOnline.com for copies of our earlier research
reports on ACTV, Inc.
Contact SmallCaps Online LLC -- 212-554-4158
Sources for Additional Information
The following are website addresses offering related information, and links to other sources
of information.
www.ACTV.com ACTV's corporate website
www.hypertv.com ACTV's HyperTV website
www.SmallCapsOnline.com SmallCaps Online's site for company information and research
www.FCC.gov Federal Communications Commission homepage (information on digital TV)
www.NAB.org National Association of Broadcasters homepage
www.TCI.com Tele-Communications, Inc.'s homepage
www.skyconnect.com Skyconnect's homepage
www.GI.com General Instrument Corporation's homepage
www.Scientific-Atlanta.com Scientific-Atlanta's homepage
www.pbs.org/insidepbs/dtv Public Broadcasting System digital television information
www.SEC.gov U.S. Securities and Exchange Commission, with links to EDGAR filings
www.showtimeonline.com Showtime's Home Page
www.viacom.com Viacom's corporate website
www.ppv.com Viewer's Choice website
www.newline.com New Line Cinema's website
jZ |
