Good article....NWKC: Nice Numbers, Nice Prospects...by Tom Calandra....
KLP
This company's no dot-com scum
Network Commerce: Nice numbers, nice prospects
By Thom Calandra, FTMarketWatch.com
Last Update: 4:00 AM ET Jul 26, 2000 NewsWatch
Latest headlines
LONDON (FTMW) -- Amid the rush of earnings reports, several this month easily qualify for the fickle way investors are handling Internet stocks.
One of them, Network Commerce (NWKC: news, msgs) of Seattle, just finished its fourth quarter as a publicly traded Nasdaq company. These days, four quarters as an Internet stock basically qualifies a company to be treated as dot-com scum, regardless of sales growth or the quality of products and executives.
No different for this company, which develops payment systems and other marketing tools for online sellers of goods and services.
Network Commerce, which helped Pokemon trading card company Wizards of the Coast (HAS: news, msgs) set up an online store and licensed a customer acquisition engine to Planetofmusic.com, this week unveiled its latest quarter. The numbers -- aside from the quarter's $18.5 million loss (not counting non-cash charges like stock options) -- were impressive.
Even there, a 30-cents-per-share loss for the quarter was 25 percent less than most analysts were expecting. Sales grew to $26.9 million in a rough quarter for Internet companies, up from $18.7 million in the first quarter of this year. Network Commerce's gross margins rose sharply.
The scrappy company's Web properties were ranked 16th by PC Data Online for the month of June, and those Web commerce sites drew more individual users than DoubleClick (DCLK: news, msgs) and Infospace(INSP: news, msgs), among others, the company's executives said in a conference call to investors and journalists. The company's Web sites include BottomDollar.com and SpeedyClick.com, which serve online consumers.
"It was clearly a breakthrough quarter," CEO Dwayne Walker said. "We will be guiding the Street upwards in terms of our estimates" for the rest of this year and 2001, he said.
Network Commerce is running against many familiar Internet names in its race to serve online consumers and businesses: Doubleclick, Infospace, Digital River (DRIV: news, msgs), Internet marketing company 24/7 Media (TFSM: news, msgs) and others. The company's online payment systems are used on the World Wide Web and on wireless gadgets.
Painted with a bad, bad brush
Alas, Network Commerce is painted with the brush of electronic commerce. E-commerce companies are among the worst Internet stock performers this year, in part because many electronic stores have crashed and burned. "Obviously, they're going through a shakeout," CEO Walker conceded about electronic sellers of goods and services, like Amazon.com.
A day after the numbers came out, Network Commerce's stock continued its relentless decline, falling 9 percent to about 7 and a market capitalization of $385 million. So, in the Nasdaq scheme of things, Network Commerce's 10-month old stock is double the low it hit in may but about a fourth of its January high.
One thing is clear: Network Commerce's executives must steel themselves in the face of Wall Street, as must executives of many Internet companies this summer.
Of note was the company's 52 percent gross profit margin for the quarter, up from 44 percent the previous three months. "Our business is growing faster than ever," Chief Financial Officer Alan Koslow said in the conference call.
Cash in hand
Koslow said Network Commerce now has more than 650 employees and is averaging $42,500 of revenue per worker. It has more than $80 million of cash, enough, said Koslow and Walker, to last until late next year, when Network Commerce expects to reach profitability.
On the conference call, an eager band of analysts applauded the company's financial performance. "Network Commerce continues to define itself as a leading e-commerce enabler," said Timothy Klein at U.S. Bancorp Piper Jaffray. Klein raised his revenue estimates for the company to $218 million from $187 million for next year.
The challenge for executives will be to keep frustrated shareholders and employees satisfied until the stock market alters its attitude toward electronic commerce companies. Walker, the CEO, said the company would benefit from an increasing tendency by online consumers to barter, or trade, goods and services. One of Network Commerce's Web sites is www.ubarter.com.
"We're leading the commerce suite business," said Walker about companies that try to meet the growing needs of electronic retailers. Let's hope the stock market shares his view. |
