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Technology Stocks : 7th Level -- Ignore unavailable to you. Want to Upgrade?

To: Jon Taulbee who wrote (824)	4/23/1998 10:30:00 PM
From: David Gardiner	Respond to of 1019

Speculative Bubble Inflates Further 7th Level Rides Net Wave BUSINESS NEWS "This is just 100 percent unadulterated speculation." -Bill Fleckenstein, Fleckenstein Capital By Justin Lahart and George Mannes ABCNEWS.com from TheStreet.com N E W Y O R K, April 22 - The market's mania for all things Internet shows no signs of letting up. Investors continue their mad rush toward companies that pin their business plans to the Internet, or even mention it in a press release. The frenzy, which has prompted head-scratching and dire warnings on Wall Street, sent the stock of former game developer 7th Level into the stratosphere on Tuesday and sparked Wednesday's blastoff of the Net-related companies Track Data and Alpha Micro. Internet Cachet Boosts Stock Prices April 21: Announces it will supply animation technology to Web broadcaster WavePhore. Stock Action: Gains 429% on day of news. April 9: Reveals plan to open Web site. Stock Action: Jumps 562% through April 21. April 20: Providing financial data to America Online. Stock Action: 667% rise through April 21. April 29, 1996: Debuts Internet hardware for cable subscribers. Stock Action: Gains 273% over next six sessions. "This is the biggest speculative bubble in the history of the planet," says Bill Fleckenstein, portfolio manager at Fleckenstein Capital, speaking about the market's Internet passion. Though Fleckenstein is a short-seller who makes his living betting that prices of certain stocks will fall, he's not alone in his doom-saying. Doubts Rise as Prices Soar "This is out of control," says one stock salesman, who spoke on the condition of anonymity. "Who's buying this stuff?" The case of 7th Level, whose stock price more than quintupled on Tuesday, is an instructive lesson in the market's optimism as far as the Internet is concerned. The runup in 7th Level's stock followed an announcement that the company had reached an agreement to market one of its products through WavePhore, a company that distributes free Internet-like programming through broadcast television signals. A 7th Level spokesman says the stock spike was a reaction to news that's been building for the company. But the value of the WavePhore agreement is unclear for several reasons, one of which is that the WavePhore business to which 7th Level hitched its wagon is unproven on a commercial basis: It's only two weeks old. Nonetheless, news of the agreement, and the subsequent rise in 7th Level's stock, turned it overnight from a company that the market valued at $25 million into a $124 million company. That's good news for the company, which has long counted former investment banker-and admitted felon-Michael Milken as a major shareholder. 'This Will End in Tears' But 7th Level still has a tough road ahead of it as far as its operating business is concerned. The company, which in the past was known for CD-ROMs featuring the Monty Python comedy troupe, along with children's titles starring an animated character with the voice of Howie Mandel, lost $22.5 million last year. Revenues collapsed from $20.5 million in 1996 to $10.5 million last year-much of which came from closing out the CD-ROM business that 7th Level is exiting. The company hopes to make its money from selling software and services to companies that want to create interactive animation for the Internet, but that's a complete change from its past business. And it's no slam dunk either, says Susan Lammers, president of Headbone Interactive, a Seattle-based company that has already embarked on the transition from making CD-ROMs for children to an Internet-based business plan. "I think it takes a while to shift your business," Lammers says. "And there's not like a huge revenue stream to tap into on the Internet right now." Meanwhile, shares in Track Data were way up Wednesday. Investors apparently were betting that this supplier of electronic financial data could be the next Market Guide-a company whose stock zoomed on the announcement of a deal to supply similar data to America Online. Alpha Micro rose substantially, too, after announcing a new Internet software product for businesses. "It's really crazy," says one stock salesman of Tuesday's 7th Level action. "The rising tide is carrying everything higher.This will end in tears."