Thread...An interesting article from the today's (Friday) Wall Street Journal concerning internet partnering. According to the table, Yahoo has a market cap of 6 billion $. If Alta Vista was worth half that, it would represent close to half the actual cost of DEC and would represent 7 to 8 percent of the total market value of CPQ. Since it is unlikely Alta Vista contributes positive earnings what is the strategy in holding it as a wholely owned subsidiary? Why not sell off at least a part of it for the benifit of the shareholders? Or is there a profitable reason for keeping it to themselves? If there is one, would like to hear what your thoughts are as to what it might be.
Firms Buy Into the Internet,
But Investors Might Not Gain
By LESLIE SCISM and KARA SWISHER
Staff Reporters of THE WALL STREET JOURNAL
Big media companies are suddenly staking out claims to
the Internet, giving some of the on-line stocks yet another
reason to catch fire.
But as Thursday's near round trip in Infoseek stock
shows, investors can't be too optimistic about how all
shareholders will benefit as the giants muscle in.
The action heated up after General
Electric's NBC division announced
a minority investment in
internet-media company CNET and
its Snap! directory service on June
9. And reports Wednesday that
America Online rebuffed a recent
offer by AT&T only intensified the
frenzy.
So investors piled into other
Internet companies with search and
directory services such as Lycos,
Yahoo! and Excite. All are
so-called portal Web sites, which
are seeking to become central
destination spots complete with
e-mail, commerce, news and other
services.
Thursday, Walt Disney's
announcement that it would buy a
minority stake in Infoseek initially
sent Infoseek stock up as much as 7
1/2 points to a midmorning high of
42. But when the deal's complex
terms seemed to indicate Disney
got a bargain, the gains all but
evaporated, and the shares finished
up only 5/8 at 35 1/8.
PaineWebber analyst James
Preissler, for instance, calculates
that the entertainment company is
gaining its 43% minority stake at
an effective price of about $7 a
share, about a fifth of Infoseek's
current market price. "In essence,
Disney got a great deal from
Infoseek," Mr. Preissler told
clients late Thursday.
The same kind of analysis sent the stock of other Internet
companies down as well. Excite, which had been up
more than 5 points earlier, closed down 3 to 73 1/8.
Yahoo, up 5 3/4 at one point, finished down 2 7/8 to 127
3/4. But Lycos, which had been up 4 1/2, held on to
some of its gains to finish up 2 1/8 to 61 5/8 --
seemingly because it is viewed as one of the likeliest to
forge a similar alliance with its own big media patron.
PaineWebber's Mr. Preissler, for one, says the
Disney-Infoseek alliance, whatever its terms, may spell
tougher competition for its rivals. "Without a doubt,
Infoseek is much better positioned today than Thursday
with Disney behind it."
Other Internet companies were exultant about the
implications of the Infoseek deal, before the terms
emerged. "They can't ignore us as some little trend," said
Excite's Brett Bullington. "There is now a widespread
belief by the big companies that they must be in this
arena."
Indeed, of late, Silicon Valley has been crawling with
media executives from large, traditional media
companies. Besides GE and Disney, Time Warner and
News Corp. are said to be seeking to buy part or all of
the many Internet start-ups spawned as the World Wide
Web has grown. "The one thing that has become clear to
most of the large players in the media business is that the
prime Internet real estate is getting more expensive, not
less expensive, and if you want to buy your way in, now
is the time to do it," says Shaun Andrikopolous, an
Internet analyst with BT Alex. Brown.
David Readerman, an analyst with NationsBanc
Montgomery Securities, calls the NBC investment in
CNET "a catalyst that may unleash the fear of being left
out of the Internet," and he anticipates a wave of
investment-banking activity not unlike the one in which
banks are snapping up securities firms.
How much even Infoseek investors stand to gain in the
short term, however, is uncertain. Keith Benjamin, a
BancAmerica Robertson Stephens analyst, notes that the
Disney pact commits Infoseek to paying $165 million to
Disney for promotional activities, and this will
"dramatically increase" the Internet company's expenses
for the next two years, "pushing out" the day when
profitability is reached.
"The question is whether the Disney brand and
distribution muscle gives the venture the ability to be
ranked 1, 2, or 3, as opposed to its current ranking of
No. 4," he says. There's also the question of how much
upside shareholders ultimately would get if Disney
chooses to expand its ownership, he adds.
For their part, Yahoo and Excite have long maintained
their independence is a plus, and they aren't officially
welcoming suitors with open arms. "I don't know why it
is always thought that we are going to be the ones that
are to be bought," says Excite's Mr. Bullington. "Who is
to say that Excite or Yahoo won't buy a media
company?"
Portals in Play
Media giants such as NBC and Disney are suddenly
snapping up stakes in companies with Internet portal
sites, sending some stocks flying even higher. Who might
be next? Here are some candidates.
STOCK
MKT.
VALUE
(billions)
PRICE
CHG.
SINCE
6/8
REMARKS
America
Online
$19.7
+10.8%
Nation's largest on-line
service with e-mail,
chat, publications,
more
Yahoo!
6.0
+16.8
Search-and-directory
service with 31.4
million monthly users
Netscape
2.5
+22.5
Internet software firm
with a portal division
Excite
1.8
+18.4
With 19.4 million
monthly users, another
leading
search-and-directory
firm
Infoseek
1.1
+51.1
Search-and-directory
firm whose new
Disney pact spurs
interest in group
Lycos
1.1
+22.6
Similarities of this
search-and-directory
service to Infoseek
suggests it's good bet
for next pact
One drawback for that kind of scenario is that although
these companies have drawn millions of users monthly,
only Yahoo and AOL have shown profits and that has
led plenty of skeptics to question their lofty stock market
values.
High prices are reportedly the reason that Disney didn't
end up doing a deal with industry leaders Yahoo and
Excite, though it held talks with both of them about
possible investments. Like NBC, it preferred a cheaper,
lesser-ranked concern.
Some executives of other media giants sought to play
down the chances they will do similar deals.
At News Corp., executive James Murdoch says, "I don't
know if the Internet ... is what you should be paying top
dollar for now." After talks with many parties, it
recently settled on a pact that gives it a 40% stake in
United Video Satellite Group. "I think the Internet as a
distribution medium is not the only one," he says.
Time Warner is known to be holding exploratory talks
with a number of Internet companies, but people familiar
with its thinking say Time Warner doesn't feel
compelled to do a transaction because of its many
existing Internet businesses. The company maintains it is
already well positioned on the Internet and in the
new-media world.
Earlier this week, Microsoft and Compaq Computer,
placing a bet on the cable industry's ability to deliver
high-speed Internet access, each invested in Time
Warner and MediaOne Group's Road Runner service.
The attraction of Road Runner is the speed with which
cable modems can deliver Web pages. Time Warner
also operates hundreds of individual Web sites
produced by its magazines and movie studio, and it sells
compact disks and books over the Web.
Nonetheless, analysts believe more deals will occur.
Lise Buyer, a technology analyst with Deutsche Bank
Securities, thinks companies likely pondering the matter
run the gamut of "traditional media companies." But
because such companies "feel more strongly about
positive earnings" than do often-unprofitable Internet
ones, they may favor "more partnerships than outright
acquisitions" because the latter could dilute their
earnings.
-- Eben Shapiro and John Lippman contributed to this
article. |
