"OFFTOPIC": Take a look at INNI, a great potential intenet stock!
1. Company name: I/NET Inc.
Address: 643 W. Crosstown Parkway Kalamazoo, Michigan 49008
Contact: I/NET Inc.
Stephen J. Markee, 616/344-3017 ext. 104
smarkee@inetmi.com or
Seyferth & Associates, Inc.
Jeff Lambert or John Vonder Haar, 800/435-9539
SeyferthPR@aol.com
Web address: inetmi.com
2. Business: Internet server products for IBM AS/400 systems.
Consulting in developing and maintaining web sites.
Work force: 20 employees, most engineers (marketing is down by IMS)
3. Outsatnding:
In 1993, I/NET became a public company, at the same time repositioning itself to
develop and market its own products in addition to its ongoing R & D business.
This expanded company direction was a response to timely opportunities in the
rapidly-evolving multimedia marketplace and the forging of strategic
partnerships with IBM (which purchased a 16 percent share in the company)
and Electronic Data Systems (EDS) for multimedia product development,
packaging, and marketing.
Trading symbol INNI (OTC-BB)
Trading range 52wk high 0.47 low 0 .17
Today Price 0.25
Shares Outstanding/float: 30mil/13mil
IBM own 16% shares
SEC filings edgar-online.com
Recent News Release: quote.yahoo.com
4. Earning:
The first quarter earning of 1998:
"KALAMAZOO, Mich--(BUSINESS WIRE)--May 11, 1998--I/NET, Inc. (OTC:INNI - news) today announced record earnings on a 60 percent increase in net revenues for the first quarter ended March 31, 1998.
The developer and marketer of Internet- and Intranet-based software applications for mid-range computers reported net earnings of $33,565 on net revenues of $432,781 in the first quarter 1998, compared with net earnings of $24,017 on net revenues of $269,748 in the same period last year. The 1997 results included an extraordinary one-time gain of $97,946 from the extinguishment of a previously recorded debt. I/NET attributed its second best ever quarterly revenue results to the
further developent of its internet and intranet products and web site services."
5. Analysis:
The following analysis is based on information found on various web sites and
conversation with Stephen J. Markee, President and CEO.
(1) Main Products
I/NET's main products includes MERCHANT/400 (retail price $15,000, must be used
with Commerce Server/400 ), COMMERCE/400 (retail price $4995),
WEBSERVER/400 (retail price $2995) and WEBULATOR/400 (retail price $2995).
The description of these products can be found at inetmi.com.
Netscape SuiteSpot server products will be ported by I/NET to AS/400 and will be
released on the end of July. The first one coming out will be the Enterprise Server.
(2) The Market for I/NET's Main Products
I/NET's main products are specifically for IBM AS/400 users. There are about half
million AS/400 users worldwide. The new AS/400E, mainly targeted at network server
market, is expected to sell between 25,000 to 50,000 units per year. The ported
Netscape products will be for the new RISC based AS/400E with V4R2. The current
worldwide AS/400 market is illustrated below:
US and Canada: 30%
Europe: 45%
Asia: 20% (with 80% of users in Japan)
Other: 5%
I/NET just recently started sales to Asia market.
Competing with I/NET ported Netscape server products in AS/400 market will be
Lotus Domino suite, which is more complex and requires large resource to get it up and running. Hence it is mainly for large corporations. Also note that Domino suite will marketed by Lotus while I/NET's products will be marketed by International Marketing trategies (IMS, imsworldwide.com ) as well as IBM marketing channels.
Another interesting note is that although IBM has its own 5250 Emulation product, it
now recommend Webulator/400 to its users.
Since IBM is actively marketing AS/400 as Internet servers and since I/NET will ship
Netscape's popular SuiteSpot Web servers that will run natively on the AS/400, it can
be expected that more and more users will accept the idea of using AS/400 as Internet servers. The sales of I/NET's server products should increase after the second quarter.
(3) Other Products and Services
Recently, I/NET lunched Career/Net. It is marketed by a Miami company. Customers
signed up include Citibank and pageNet. The software costs $5000 for license fee plus $500 per month for support.
I/NET is also doing consulting business. For example, it designed IBM's AS/400 web
site and has just extended its contract with IBM to maintain that site (for 12 months, and $500,000). I/NET's consulting customers also include: The Upjohn Company;
International Research & Development Corporation; Kodak ; Electronic Data Systems; The Chicago Tribune; United States Government ; W. K. Kellogg Foundation; Greater Kalamazoo Association of Realtors.
(4) Revenue Estimation
It is hard for me to estimate I/NET's revenue from Career/Net and consulting
business at this time. So I will just try to do a conservative estimation on its Internet
server products for the next three years. Before we can that, we need to take a look at the agreement between I/NET and Netscape and between I/NET and IBM. In order to port Netscape server product to AS/400, I/NET need to pay Netscape $1.25 MM per year for three years, $1MM is for license fee and $0.25MM is for development
support. IBM is paying the fee on behalf of I/NET. IBM also paid I/NET $0.6MM in
advance for agreeing to take on this project. The $3.75 + $0.6 MM that IBM paid
Netscape on behalf of I/NET will be reimbursed to IBM out of the future revenue of the
ported Netscape products. However, I/NET is under no obligation to pay IBM if no
revenue is realized from the Netscape server products.
Since AS/400E sales is expected to be 25,000 to 50,000 units per year. I will take a
lower estimation of 20,000 per year. That's 60,000 units in three years. Since this
machine is marketed as Internet server products, I will assume half of them is actually used as Internet servers. Among them, assume only half of the users choose I/NET's products over Lotus Domino suites. That's 15,000 new users for I/NET. Among the existing half million AS/400 users, I will only assume 5% of them, that's 25,000 users, buy I/NET server products in the next three years. So they will have 40,000 new server product users over the next three years. (Note that, in reality, even users don't use AS/400 as Internet server may want to buy WEBULATOR/400 for 5250 Emulation.) Although I/NET products are priced from $2,995 to $15,000, and many users will need more than one product, we will just assume each user buy one product at average $3,000. That's 40,000x$3,000 = $120,000,000. Deduct the $4.35 that has to be reimbursed to IBM, we get $115.65MM. Using $40% profit margin (company's current profit margin is 44%), we get $46.26MM profit for three years. That's $15.24MM per year. Divided by the 30MM shares outstanding, we come up with $0.514 per share. That means this will be a $10 stock using a PE ratio of 20.
(5) Risk Analysis
At this point, it is not clear to me whether AS/400 will be successful in competing with well-accepted Unix and NT servers in the server market. Therefore the 20,000 units AS/400E per year sales projection might be wrong. Another factor that may affect the outcome is the competition from Lotus Domino suite. However, I feel that IBM has a strong loyal customer base and I believe my estimation is conservative. Even if the sales turn out to be 1/10th of my estimation, the stock will still worth about $1. At today's price of $0.25 level, the risk/reward ratio is still heavily in our favor.
Fuza |
