Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : OnSale Inc. -- Ignore unavailable to you. Want to Upgrade?

To: D.J.Smyth who wrote (795)	2/18/1998 1:08:00 AM
From: Vic A	Respond to of 4903

For everyone who keeps posting reviews of their positive experiences with Onsale - No one has responded if they use HSC. I still submit that the type of persons who can and will use Onsale is limited. In order to have the exponential growth that those hyping this stock are counting on, I think a much, much larger potential client base is necessary. Just counting the number of people in America with computers is not going to work. Along those same lines, I don't think that the AOL service provides any more potential than Onsale has. Mass subscriptions cover a much wider path across user profiles. Although I feel that Onsale and other on-line Auction companies are viable business opportunities and that they do and will continue to have a substantial following, I just can't see where the legions of new active buyers with the model profile are going to come from.

To: D.J.Smyth who wrote (795)	2/18/1998 1:46:00 AM
From: Vic A	Read Replies (1) \| Respond to of 4903

A couple of notes on Onsale's future earnings prospects. Assuming that one agrees that at some point the company must post a reasonable profit, here a few practical business scenarios that must be considered: 1. As I posted earlier in the thread - Even if the so called "Marketing" strategy for quickly growing the company works (which is debatable itself) and there is remarkable, even exponential growth - the company will need to pour all of its potential earnings back into expanding its infrastructure. This will continue to put extreme pressure on net earnings until they reach a point of leveling off of revenue growth. That does not mean that they can't or won't make money - but that what they do make will need to be used to expand capacity to handle the increasing work load. Example - Acme Trinket company starts business and sells so many trinkets their first year that they make a $15,000 profit on 100,000 sales (pretty good) but because of the increased volume they must now purchase another delivery truck - result is a loss for the year. The next year they make 30,000 on double revenue - but now they must buy another truck - rent more space - hire additional administrative support, etc. They will actually start to show a net profit when the revenue growth slows to a point where they can operate at maximum efficiency without additional capital expansion expenditures. 2. Competition - Their are some competitors already gearing up and many, many more on the horizon. Why not major threats to Onsale yet? Because Onsale has yet to show any EARNINGS. Smart investors are not going to pump money into starting up an on-line Auction just because they can - they need to see that someone else is making a decent return on equity or that the potential is their for them to MAKE MONEY. That has not happened yet. Be assured though that if and when Onsale starts showing impressive earnings (actual or potential) there will be plenty of competent, deep pocketed services going for the business. In this case the market will be diluted among the competitors - all of whom will be taking market share from Onsale and which will prevent them from the achieving the EXPONENTIAL growth that is being touted. That growth is going to be needed to support the inflated stock price. Earnings Dilemma Summary: 1. Rapid Exponential Growth will cause continued investment in infrastructure that will hurt earnings - therefore not supporting the inflated stock price. 2. Even if successful (and especially if so) they will create their own demise by spurring aggressive competition (Just as the proliferation of search engines chasing Yahoo) - therefore never achieving the BILLION dollar revenues being touted by some on this thread. Again EVEN IF there is a billion dollar AUCTION market out there (which I strongly doubt) it will not be left solely to Onsale exclusively. Continued debate most welcome..........