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Technology Stocks : General Magic -- Ignore unavailable to you. Want to Upgrade?

To: Rubber Man who wrote (3217)	8/3/1998 3:03:00 PM
From: Austin S.	Read Replies (2) \| Respond to of 10081

Here is a reprint of the Goldman, Sachs GMGC report issued Today: Reprint from report issued today at 1:44 p.m. ************************************************************* From Michael Parekh (New York) Rating: Market Outperform Last week General Magic (GMGC) reported Q2 1998 revenues and EPS of $91 thousand and ($0.82) and launched Portico. In the qtr., GMGC completed a funding round that bolstered the cash position to $58 million. We expect the stock action to be less related to the reported financial metrics and more linked to Portico's product adoption and user feedback. With the company meeting its self-imposed deadline of the July 30th launch, the subscription revenue model for the service is likely to provide sequential quarterly revenue growth. Along with the launch of the service there are several new focal areas for the company, in particular, the subscriber acquisition strategy will determine the overall revenue growth over the next few quarters. To date, GMGC has partnered with 52 resellers representing over 200 regional areas and also offers customer sign-ups from its web site. (http://www.generalmagic.com). GMGC has been working with its resellers in anticipation of the launch and has set up incentive plans with each vendor to grow subscriber count. The Portico service will be offered at multiple price points ranging from $20/60 minutes of usage per month to $150/1,300 minutes per month. In addition there is also a one-time $50 set-up fee. While the company has stabilized its capital base for the next few quarters, we expect limited financial risks during this time frame. However, over the next few months we expect the company to gradually scale its servicing and support operations as it prepares for the ramp. In the near term, we expect the provisioning of the training services to be the primary gating factor to growth. Over the next few months, the stock action will be driven by adoption of the service and overall customer response. While the rollout had been limited to 1,000 individuals in the beta phase, the final launch is likely to provide further improvements in the service as a wider group of users experience the functionality and user interface. Assuming a moderate ramp up to a target rate of 500 subscriber additions/week by the end of 1998, GMGC could see revenue contributions in Q3 and Q4 of 100K and 500K, respectively. The overall burn rate of $9 million is likely to grow as well as new headcount in the new services area is added. While these estimates might yet prove [to] be optimistic, we are encouraged by the management execution leading up to the launch and expect further momentum as the scheduled advertising campaign is launched prior to the Christmas shopping season. END OF REPORT