Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Amazon.com, Inc. (AMZN) -- Ignore unavailable to you. Want to Upgrade?

To: Glenn D. Rudolph who wrote (96879)	3/20/2000 12:30:00 PM
From: Danny	Read Replies (2) \| Respond to of 164684

VERT and ICGE running out of money? Give me a break. Read this interesting comment from Briefing: Barron's Burn Rates : As is often the case, Barron's takes a good idea and ruins it. We noted last week that that the Peapod (PPOD) news introduced a new era for the Net: the era of bankruptcies. Barron's also picked up on this new era, but then made a mockery of the idea. The cover story included two huge flaws which made the conclusions of little value. First, in calculating burn rates, Barron's assumed that a company's operating margins going forward would remain unchanged. Companies moving towards profitability were therefore treated the same as companies whose losses were increasing. Second and even more important, Barron's paid no attention to a company's ability to obtain financing. Certainly Peapod is in a very different world than VerticalNet (VERT) right now. There is a very real risk that PPOD will not obtain financing and will have to declare bankruptcy. But VerticalNet? Please. Whatever you think of the company, there is no question that the market will gladly reward it with more financing. That could ultimately change just as it did for Peapod, but it won't change so fast that VERT will have difficulty addressing its near-term financing needs. The Barron's article highlights a key problem with journalist's approach to market stories. The risk of Internet bankruptcies is an important story, but as with most journalistic pieces, the Barron's story tries to apprroach in objectively. Objectivity means doing the math -- how much cash does a company have, what is its current burn rate, and when will the company run out of cash at the current burn rate. That's a reasonable starting point for a discussion of Net companies with potential cash problems, but only a starting point. From there, you must look at the trend in the company's finances -- is it moving toward profitability and will that help to avert a problem? Also, you must consider the prospects for financing. Clearly, all of the B2B companies mentioned in the story -- VERT, ICGE, ITRA -- will have no problem getting additional financing. Finally, there was the small issue of errors. CDNow (CDNW) was mentioned as running out of cash, but it just received a big cash infusion. And the numbers on HLTH were just wrong, according to Robertson Stephens. In short, the Barron's list of burn rates is interesting, but hardly a place to end the story. Much more homework needs to be done before believing that companies high on the list, like VERT, are about to go chapter 11.