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To: Immi who wrote (746)	12/13/1997 1:07:00 AM
From: blankmind	Respond to of 1629

Beware Of Internet Stocks, Analysts Say (12/12/97; 3:01 p.m. EST) By John Borland, TechWeb NEW YORK -- Wall Street financial analysts warned Internet World attendees Thursday against investing heavily in Internet stocks, saying the market was not yet mature and the means of measuring a company's success were not yet well-developed. "This sector is not suitable for most investors," said Mark Usem, a financial analyst with Salomon Brothers. "It's too early. It's still a kind of advanced venture capital. ... Even the analysts are still struggling." Although the potential for enormous gain exists, the risks are large, the analysts said, speaking at a two-day Internet Finance Symposium. Technology stocks as a breed can swing wildly, as demonstrated by Oracle's 29 percent drop on Tuesday. But the stocks of Internet companies, most of which are still running in the red, are potentially even less stable than their high-tech cousins, the panelists said. "Volatility is very high," said Richard Sherlund, managing director of Goldman Sachs & Co. "We're never far from controversy in this area. And controversy alone can cause a stock to rise or fall." The analysts said even they are not sure how to measure a Net company's expected performance. Valuations of ordinary stocks are traditionally based on a company's expected earnings potential. But in the new world of Internet companies, few companies are actually making money, and nobody is quite sure what the successful business models five years in the future will be, much less how to measure them. The business strategies of Internet start-ups tends to exacerbate their stocks' volatility, said Bill Gurley, a partner with the Hummer Winblad Venture Partners capital company. Companies know the success -- or even the perception of success, in the case of very young companies -- can breed buzz, new investment, and new business. Marketing efforts come on like a blitzkrieg and accelerate from there. "This marketing bleeds over into the financial market," Gurley said during his own solo Internet investing presentation. "It gets the stock up, but then it creates issues" with potential overvaluation. This kind of overlap between hype and stock value can create dangerous feedback loops, Gurley said. Many young Silicon Valley executives do not realize that a jump in a stock price translates into higher Wall Street expectations, and "missed expectations are more important than ever because of fragility of [Internet] business models and the availability of financial information," he said. If a company falls short of these inflated expectations, it can cause a precipitous stock drop, Gurley said, and once this happens, investors and potential clients may look at the falling prices, assume the company is failing, and take their business elsewhere. To counter the marketing speak and the good or bad buzz about a company, institutional and individual investors should look at what the company's temporary measures of success are, Usem said. This "latch factor" can be the number of subscribers, revenue growth, or the ability to attract advertisers for an Internet company, he added, all measures that are very different from the traditional expectations of earnings. "There's a lot of hype out there," Usem said. "Our job and yours is to sift though the hype and figure out what's real."