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Strategies & Market Trends : Cents and Sensibility - Kimberly and Friends' Consortium -- Ignore unavailable to you. Want to Upgrade?

To: 2MAR$ who wrote (68803)	1/28/2000 2:24:00 PM
From: puborectalis	Respond to of 108040

Put ICGE away!.....worldlyinvestor.com Sector of the Day ABC's of B2B: Try ICG By Emily Burg, Correspondent The best way to play the B2B boom may also be the most expensive: holding company ICG. Internet Capital Group (Nasdaq:ICGE - news) is attracting a lot of attention in the increasingly crowded business-to-business (B2B) e-commerce arena. But not all of it has been good. Often likened to CMGI (Nasdaq:CMGI - news), ICG invests in and incubates approximately 50 B2B e-commerce companies. ICG is a compelling investment opportunity to investors looking to make a play on the white-hot B2B sector, but who can't seem to figure out which of the sector's many players may be their best bet. But as ICG's market capitalization skyrockets, with some statistics citing it as the third biggest Internet stock after AOL (NYSE:AOL - news) and Yahoo! (Nasdaq:YHOO - news), some are raising their eyebrows at ICG's pricey valuation. Many are beginning to wonder if the company's meteoric rise means that its fall will be just as fast. ICG went public in August 1999, doubling on its first day. The stock has soared a split-adjusted 500% since. Investors are crazy for the stock, viewing it as a one-stop shop for investing in B2B e-commerce winners. Analysts are very bullish on its prospects too, although most who cover the company also underwrote ICG's IPO. Big Growth Plans If word from the company is any indication, ICG shows no signs of slowing down. The company has said that it plans to double the size of its investments in 2000, from $600 million to $1.2 billion. Also, the company may make upwards of 20 acquisitions this year. Several of its companies have come to market as IPOs, including VerticalNet (Nasdaq:VERT - news) ______THEY OWN 35% and Breakaway Solutions (Nasdaq:BWAY - news) _____THEY OWN 53%, and ICG recently sold its 13% stake in Tradex Technologies to Ariba (Nasdaq:ARBA - news) for about $1.86 billion in stock. Deja.com, a consumer decision-making site, is the firm's one business-to-consumer (B2C) holding. It's this aggressive acquisition and investment strategy that has propelled the company's stock skyward and captivated investor interest. And if the company can continue to add value to its proud portfolio of holdings, surely investors will continue to shell out more than 1000% of the value of ICG's assets for a share of ICG. ICG's valuation looks even more expensive when you realize that B2B investing mania may cool down sometime this year. Although the growth statistics for B2B e-commerce are huge, it's difficult to tell how long investor enthusiasm for the sector will last. Just look at how, by the end of 1999, investors had put once-smoldering e-tailing stocks on the back burner. Stellar B2B Prospects According to recent research by Eric Upin, B2B analyst with Robertson Stephens, the collective market capitalization of B2B stocks rose from $25 billion in September to $90 billion by the end of 1999. And the growth prospects are stellar, too. Upin estimates that of the $20 trillion worth of commerce taking place in the US annually, $17 trillion of that is B2B commerce. By 2003 it's expected that 10% of that $17 trillion will take place over the Web. It's numbers like these that incite investor enthusiasm for the B2B sector in the first place. And given how crowded the space has become - it's getting harder to tell a Razorfish (Nasdaq:RAZF - news) from an E.piphany (Nasdaq:EPNY - news) - it's easy to see why the idea of getting a piece of 50 different B2B companies through one stock is very appealing. A Slippery Slope But there are limits to the idea of a one-stop shop for B2B e-commerce companies. As B2B e-commerce becomes more mainstream, investors will have more distinguished opportunities to invest in star companies. They won't need to be so reliant upon ICG's ``finger in every pie' model. Also, as the B2B space widens, burgeoning companies may look to other venture capital outlets for funding. In time, ICG's cash and expertise may not be as valuable to start ups as they once were. A recent report by Forrester Research argues that the one-stop shopping investing model for dot-com or e-commerce companies may soon become a thing of the past. Analyst Bruce D. Temkin argues that closely-knit incubating organizations like ICG should enjoy a rocking 2000 but won't hold beyond 2001, owing to mutual fund rules regarding ownership and the fact that over time, the knowledge and cash that ICG offers its companies will become standard, leaving ICG in search of a new value proposition. If Temkin is right, investors who already own ICG should brace themselves for a hit within the year. Investors who are considering buying ICG should hold off until after the shakeout. A Reminder Here's another factor to consider if you're trying to time a buy or sell of ICG. ICG's lockup period ends in February, and 46 million shares of the company will become available. Another 45 million will hit the market between March and May, followed by an additional 95 million in June. Analysts expect the introduction of so many shares to the market to dilute the value of existing shares, which could mean a nice buying opportunity for those looking to get into the stock. But existing shareholders may be none too pleased if the share price sinks in the coming months. --------------------------------------------------------------------------------