sw, ACTV goodies to follow...
Thursday, Jul 20, 2000 7:33 AM ET
To: art slott who wrote ( 11105)
From: Craig Jacobs
Never fall in love with a stock, TOO LATE for most ACTV shareholders, passion = fanatical.
By: wcreekbob98 $$$
Reply To: None Thursday, 20 Jul 2000 at 6:39 AM EDT
Post # of 51577
Another sweet read on ACTV! YES
ENJOY CREEK
7. The Convergence Industry Issue #69
No, Gemstar Doesn't Cut It, but ACTV Is in the Picture
By Lauren Keyson
We received several letters over the past week from readers suggesting companies they thought might fit into The Internet Analyst's Convergence Index, which we define as having these four components:
Computers, including hardware and software
Media, including information, data and content fulfillment
The Internet
Telecommunications, including telecom, wireless and broadcast
Most suggested companies that had two or three of the components we look for. Aubrey Powell from London suggested TELEWEST COMMUNICATIONS (TWSTY), the United Kingdom's No. 2 cable company in terms of subscribers. TELEWEST, with a market cap of $8.7 billion, grew its revenue by 47% in 1999. It had a respectable first quarter in 2000 as it started to roll out its interactive digital TV and broadband Internet access services. The headlines on TELEWEST, however, mostly involve MICROSOFT's (MSFT) decision to bow to European antitrust regulators and not seek control of the company along with AT&T's (T) LIBERTY MEDIA (LMGA) unit.
TELEWEST is an interesting company in a hot industry. But while TELEWEST has media, broadcast and (fledgling) Internet components, it lacks a computer presence. His second suggestion, NTL INC. (NTLI), is the U.K's largest cable operator, with a market cap of $8.4 billion. Besides cable NTL, provides local and long-distance telephone service and Internet access over its cable and fiber-optic networks. It plans to roll out its wireless service by the first quarter of 2001. It's a solid telecom growth play, with analysts generally positive even though first-quarter revenue and earnings came in a little below projections. But, NTL has only two of the four components needed to be included in the Convergence Index.
We are specifically zeroing in on Convergence companies because of the cutting-edge investment opportunities these companies represent. Convergence is a chance to own shares in businesses that are using new tools – the Internet and rapidly evolving telecom and computer technology – and applying them to old businesses – content and information delivery. It's new and unexplored territory, with new media, Internet and wireless quickly transmitting text, graphics and audio all at once.
Another reader, Tibor Deak, thought he had the perfect pick to fulfill this mandate. "Hello? What about Gemstar? I think they have staked out a prime spot in the arena for convergence, much more so than half of the companies in your Index. You have heard of them, no?" (It may be just my impression, but it seems like all trace of civility has vanished from e-mail.)
Yes, we have heard of GEMSTAR-TV GUIDE INTERNATIONAL (GMST). It's the $15.3 billion market-cap company that invented VCR Plus+. Now it develops, sells and licenses proprietary technologies and systems designed to simplify consumers' interactions with platforms that deliver video programming information and other data. But while GEMSTAR qualifies in computers and media, it is not strictly speaking a telecommunications play and it has no presence in the Internet. Therefore it doesn't fit into our Convergence Industry.
However, thanks to our readers, we did add four new companies to the index, including HANDSPRING (HAND), SONY (SNE), VIRAGE (VRGE) and ACTV CORP. (IATV). Most of the letters I received concerned ACTV, which is pioneering the convergence of TV and the Internet with its patented process called One-To-One Television. (After doing a little research, I found out that I received so many ACTV letters because the shareholders in this company border on the fanatical.)
The company has two product lines, The first is SpotOn, which is a joint venture with MOTOROLA's (MOT) broadband division and works directly with cable providers to deliver targeted messages to individual viewers based on demographic information stored in their digital set-top boxes. The second is its Individualized Television product that involves choosing between four unique video streams. The product lets you can watch TV and seamlessly customize your viewing experience, choosing from four different camera angles – main feed, production element, replay or one-way broadcast technology.
I asked Ted O'Donnell, ACTV's vice president of finance, what investors are getting when they make ACTV their Convergence investment. "They are getting in on ground floor of a company that had the thought process to go ahead and work through – and survive, and thrive – the interactive television trials. There were 122 interactive TV companies out there five years ago, and we are the only ones to make it through that carnage. Interactive television had a bad name for a while."
I wondered why he said that people had soured on interactive TV, and he explained that the industry had hyped itself too early in the game. "People were always promising a 500-channel cable universe in a year, but the infrastructure and technology just wasn't there yet. When you over-promise, people get mad."
That said, there are other risks involved with investing in Convergence companies. A company might be able to take new tools and apply them to existing businesses, but people won't like the result. Maybe viewers won't want to buy a book at the same time Oprah is talking about it. People may not want to watch TV on their computer, or perhaps they won't want four camera angles to choose from while they watch, say, a football game.
"I think people do want more choices," said Mr. O'Donnell. "In the studies and tests that we conducted, people wanted more choices. We set up focus groups, went through and asked the basic question: 'Would you subscribe to a service like this?' and 80% said they would."
Next week, we'll take a look at some other interesting Convergence plays. In the meantime, keep the ideas flowing by sending new Convergence investment ideas to add to our Index. E-mail me at: LKeyson@multex.com.
To read an interview with William C. Samuels, ACTV's chairman and chief executive officer, please see Executives Zero In, The Telecomm Analyst, June 27, 2000.
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