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Strategies & Market Trends : Sharck Soup -- Ignore unavailable to you. Want to Upgrade?

To: American Spirit who wrote (19199)	4/28/2001 10:31:37 PM
From: puborectalis	Respond to of 37746

Are All Dot Coms Dot Bombs? By Kathy Boyle CFP, CEO Chapin Hill Advisors Back to Previous Page Apr 27, 2001 04:18 PM With the demise of so many dot coms over the last year and a huge shift in the mentality of the investing community, is it even worth looking at dot coms for potential investments? The jury is still out on a number of issues. Speak with almost anyone and you will find the Internet a large part of their day to day life. From accessing email, getting quotes, finding news stories, ordering clothes, dog food and gifts to business productivity uses, the Internet continues to play a large role in our lives. However, what revenue model works and how big the profit potential still remains to be seen. Some of the larger survivors are finally either turning a profit or profits seem to be on the horizon. In many cases, they have become virtual household names. Who hasn't head of Amazon {AMZN, News, Boards}, Ebay {EBAY, News, Boards}, AOL {AOL, News, Boards} and Yahoo {YHOO, News, Boards}? Amazon recently reported in line with consensus and profitability seems to be in the not too distant future. They signed a deal to essentially take over Borders.com's web site which will end up increasing market share for Amazon. Ebay reported positive earnings and forecasts look good. Aol and Time Warner's merger seems to be moving forward and prospects are rosy. Yahoo, after suffering turmoil with a new CEO and turnover in their top management tier, seems to be coming back into favor with Wall Street. But what about the second tier? What about all those super stars of last year's bull run? Are there any survivors? Many companies have declared bankruptcy or are struggling. We saw Etoys.com barely make it through the Holiday season. Excite has been through many gyrations and is now part of AT&T, creating a drain on the parent company. The publically traded Internet venture capital like funds such as CMGI {CMGI, News, Boards}, Softbank {SFTBF , News, Boards} and Internet Capital Group {ICGE, News, Boards} have completely lost their luster and investors seem to scoff at buying their shares. E-commerce stocks are in a tough situation as they cannot use stock options to lure talent any longer and the "big guys" like KPMG, E&Y and others are competing for the same business. Some stocks have cash on their books which is worth more than their total market value. Stocks such as AskJeeves {ASKJ, News, Boards} had cash, cash equivalents and short term notes worth approximately $105 million at the end of 2000, yet their market value is less than $70 million. While they may have cash on their books, if they don't have a revenue model which makes sense, the cash will be used to supplement cash flow. This "burn rate" was fine when new capital was easy to get and flowing into the companies. But the companies lending and investing into these sectors have become much more discriminating and earnings now matter. A few companies do seem to be approaching profitability, are dominant in their category and often have big backers. Homestore.com {HOMS, News, Boards} is the leader in the real estate over the Internet marketplace. They are expected to report positive earnings in 2002. They've captured market share and own homebuilders.com, move.com and realtor.com. Cendant owns about 19% of this company. Another category leader is Expedia.com {EXPE, News, Boards}. They recently reported profitability a year ahead of expectations. Competing with companies such as Travelocity.com and priceline.com, this company helps you with all facets of your travel plans. The company was started by Microsoft in 1994 and they still own 70% of the company. So the Internet is here to stay but who will be able to make money and capture market share with a good revenue model remains to be seen. Companies stock prices are driven by earnings and companies need to prove themselves to be worthwhile investments. Don't completely discount the dot coms but be wary and make sure profitability will exist before you invest your hard earned dollars into this arena. Past performance, of course, is no guarantee of future performance. You must be disciplined and set targets for both losses and gains. This is not a recommendation to purchase a specific stock and you should seek professional advice before investing.