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Technology Stocks : Egghead Computer (EGGS) -- Ignore unavailable to you. Want to Upgrade?

To: taxikid who wrote (353)	3/11/1998 11:26:00 AM
From: Tae Spam Kim	Read Replies (2) \| Respond to of 8307

Egghead.com's Shares Double After Move to Internet (Repeat) (Repeats story from yesterday.) Spokane, Washington, March 10 (Bloomberg) -- Egghead.com Inc. shares almost doubled in six weeks amid optimism that its move to sell exclusively on the Internet and team up with Yahoo! Inc. and other popular Web sites will boost revenue down the road. Egghead, which sells software, computers and office equipment, said in January it will shutter its 80 stores to stem mounting losses. Since then, its online sales are running at more than $2 million a week, twice the pace in January. Investors are betting that Egghead -- minus its real-world real estate -- will be a stronger competitor albeit a smaller one. In Egghead's favor are its well-known brand name, a revived appetite for Internet stocks and a market for online sales that some analysts expect will reach $213 billion in 2002. ''It all comes down to a brand new industry that's taking off,'' said Starr Securities analyst Casey Stern, who has a ''buy'' recommendation on Egghead. Spokane, Washington-based Egghead rose 13/16 to a 21-month high of 12 3/16. When it unveiled its new strategy on Jan. 28, shares were trading at 6 3/8. Still, the company hasn't done much for investors in recent years. Its shares have dropped 34 percent during the past five years as sales tumbled amid competition from stores like CompUSA Inc. During that time, the technology-laden Nasdaq Composite Index more than doubled. Virtual Sales Egghead's future isn't assured. Even the most well-known online stores don't have revenue close to brick-and-mortar retailers'. No. 1 online bookseller Amazon.com Inc., for instance, had sales of $147.8 million in 1997. That compares with Barnes & Noble Inc.'s $2.45 billion last year, $14 million of which came from its Internet site. The same is true for Egghead. It had sales of $361 million in fiscal 1997 when its stores were open. The company could report online sales of about $110 million in the fiscal year that ends in March 1999, its first full year as an Internet-only retailer, analyst Stern said. Egghead expects to save about $38 million a year from the store closings and will spend as much as $9 million on marketing. It is selling its products through its own Web site and via marketing agreements with Internet directory Yahoo!, Cnet Inc., a Web-based news and information service, and USA.Net, which provides free electronic mail over the Web. Egghead is betting on an increase in Internet retailing, where sales are expected to rise steadily from last year's $6.7 billion, according to International Data Corp. Further, more than 30 percent of consumer software, totaling $2.3 billion, will be sold over the Net by 2002, according to Jupiter Communications, a technology research firm. ''Going online only gives Egghead the flexibility and focus to become a strength in the market,'' said Jupiter's Nicole Vanderbilt. Bargain? At least one investor now views Egghead as a bargain. ''The stock is much, much cheaper than most Web-based companies,'' said David Rocker of Rocker Partners LP, which owned about 1.3 million shares at the end of the year, according to regulatory filings. Egghead is trading at a price that's about twice the per- share book value of the company, while Amazon.com trades at about 53 times its book value, Rocker said. Investors have been snapping up Amazon, Yahoo, Excite Inc. and other Internet companies, sending their shares to record highs this week. The Internet enthusiasm comes as Compaq Computer Corp. Intel Corp. and Motorola Inc. all warned that first-quarter profit will be lower than expected. Internet companies aren't facing the slow Asian sales and excess inventory that are hurting computer and chip companies. With market reaction to Egghead's store closings so positive, some wonder why it took so long to make the move. ''I would have liked them to do it sooner,'' Stern said. The company, which began its Web site in February 1996, said it needed to test the waters. It saw potential in its Web sales about a year ago, said Egghead spokesman John Hough. It also wanted to give the stores a last shot, especially over the holidays, he said.