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Technology Stocks : InfoSpace (INSP): Where GNET went! -- Ignore unavailable to you. Want to Upgrade?

To: tahoe_bound who wrote (19345)	5/26/2000 1:56:00 AM
From: tahoe_bound	Read Replies (1) \| Respond to of 28311

Most of a very good article By Adam Lashinsky Silicon Valley Columnist 5/25/00 1:52 PM ET Notice how talk has died down about the three tiers of stocks, the Old Economy, New Economy and New Old Economy? That's because all the Economies are getting creamed. So, it's time for a new three-tier cosmology, this one within the tech sector itself. At the top are the best of the techs, like Cisco (CSCO:Nasdaq - news - boards) and Yahoo! (YHOO:Nasdaq - news - boards). These companies are clearly survivors. They are solid leaders in their market and remain key holdings in many portfolios even after other tech investments have been pruned. The only questions about them is their ability to sustain high growth rates and whether their valuations are still too lofty. At the bottom of this layer cake are the companies that never should have gone public, aren't ever going to earn money and should be avoided by investors at any price. There's no need to be nasty here by naming all the losers. Think drkoop.com (KOOP:Nasdaq - news - boards) and any other dot-com company that raised money in public markets with little more than a concept and a business plan that involved blowing that IPO loot in one massive marketing push. That leaves the middle as the place to look for stocks with breakout potential. This group is comprised of young technology and dot-com companies whose shares have been slaughtered, but which for one reason or another have a shot at making money for investors one day. For these companies, the initial promise of the Internet remains valid. In general, these are companies that can supply vital "enabling" technology to the Net or, on the e-commerce side, have figured out how to create value through new services that can only be delivered on the Net. Selling pet supplies online, it turns out, does not qualify. Nor do business plans that presume a never-ending supply of investors willing to indulge massive upfront losses. How to separate the winners from the losers in the middle? A key factor is cash: A company may have created a viable business on the Net, but does it have the cash to keep it going until it can sustain itself with current revenue? When losing gobs of money was OK -- three months ago -- these questions could go unanswered. Now they can't. Jamie Friedman, who follows business-software companies for Goldman Sachs in Menlo Park, Calif., calls this second tier the companies that were the "first good mover," a distinction far more important than the vaunted first-mover advantage that dot-com execs used to say was the key to success. Like Amazon, (AMZN:Nasdaq - news - boards) the first online bookseller, companies that beat the competition to market retained a distinct advantage. Friedman's job has been lonely as his favorites like Freemarkets (FMKT:Nasdaq - news - boards) (a Goldman client) and Commerce One (CMRC:Nasdaq - news - boards) have been pounded. His best example of my second tier is Stamps.com (STMP:Nasdaq - news - boards), whose shares closed Wednesday at 9 1/8, a new low compared with a high of 98 1/2. (Goldman was lead manager of a five-million share secondary for Stamps.com in December at 65. Ouch for clients; hurrah for Stamps.com.) The market seemingly has given up on Stamps.com, which enables Web-based metering of postage. With just $2 million in first-quarter revenue (and negative gross margins), Stamps.com managed to rack up an operating loss of $42 million. And yet it sat on a cash hoard of $368 million on March 31. Friedman, who rates Stamps.com a trading buy, paints the company's future in simple and optimistic terms. If the annual market for postage is $50 billion and if eventually 10% goes online and if Stamps.com can get a 25% marketshare, the company could rack up revenue of $1.25 billion. "A little bit of a lot is a lot," says Friedman. That's also a lot of ifs, but the kind of ifs that can lead an investor to a decision that this company will be something one day. Now repeat that for the slaughtered techs in your portfolio: Tier 2s stay; Tier 3s go. Wrongly Heeding the Lockup Expiration Bogeyman? It's pretty darn tough to work up a lot of sympathy for a dot-com executive whose firm is losing money hand over fist but who feels his downtrodden stock is being unfairly victimized. But it's at least

To: tahoe_bound who wrote (19345)	5/26/2000 8:16:00 AM
From: Robert Rose	Respond to of 28311

<at some point this is all like a coiled spring pushed down, still getting pushed down harder. It is just a matter of how much lower and harder it will get pushed down before snapping up> Let's look at the trailing p/e's of some leaders: csco: 156 qcom: 93 ebay: 1,235 yhoo: 530 The market still has plenty of room to fall if it wants to start evaluating companies according to more traditional metrics. We should all be managing our portfolios accordingly. DISCLAIMER: 85% cash, no short positions.