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To: Skeeter Bug who wrote (16927)	9/11/1998 8:41:00 PM
From: Bill Harmond	Read Replies (2) \| Respond to of 164684

Source: Morgan Stanley Research, July 27, 1998

To: Skeeter Bug who wrote (16927)	9/11/1998 8:42:00 PM
From: llamaphlegm	Read Replies (1) \| Respond to of 164684

And this. September 11, 1998 How to Pinpoint the Next Recession Waiting for Yahoo! to Get Cheaper Market Digest SmartMoney Gainers & Losers WAITING FOR YAHOO! TO GET CHEAPER ASK SMI The Downside of a High Income COMMENTARY Waiting for Yahoo! to Get Cheaper FUND INSIGHT Bull Market Baby DAILY SCREEN Can Keane Keep Growing Beyond 2000? FUNDS TODAY What's Bad for Bill is Good for Gold FUND INSIGHT No Safety in Value MARKET TODAY How to Pinpoint the Next Recession Market Digest SmartMoney Gainers and Losers ARCHIVE Complete 5-Day View IS THE PARTY over for Internet stocks? We'd like to think so. But just when it seems the insanely high valuations of these issues have come down to earth (or close to it), their resiliency astounds us. As the Dow dropped 249.48 points Thursday, Yahoo! (YHOO) closed down a mere 1/8 of a point. Excite (XCIT) actually gained 8.4% to close at 28 1/4 on news of a deal with online movie retailer Reel.com. Only investors in Amazon.com (AMZN) seriously embraced the selling spirit, driving down shares of the online bookseller 5 points or 5.7% to 79. But the selloff manifested itself only after a spate of articles suddenly discovered that Amazon is in a notoriously low-margin business and has scant hope of turning a profit until well into the next millenium. The absence of earnings may be one reason to avoid Internet stocks, but it isn't the right one. Amazon and Yahoo are both well-managed companies with promising futures, and may well turn out to be the next Microsoft (MSFT) or Dell Computer (DELL) -- in other words, the next great tech stocks. The real trouble is, despite the recent fall from their Everest-like highs (Yahoo is down 23% from its July 21 high of 103, Amazon down 46% from its high of 147 on that date), these stocks are still too expensive. In fact, their prices are out of all proportion with the great tech stocks everyone wishes they had bet on years ago but didn't. As our chart above shows, Microsoft and Dell, for example, have classically traded at P/E's of roughly 32 and 27 times trailing earnings, respectively, according to SmartMoney's own research. Back in 1986, when Microsoft went public, a year in which observers ranted about speculative excess and unreasonable premiums, the company's stock was considered expensive. But even then you could have bought in at less than double the P/E of the S&P 500, which has averaged 18.9 over the past 12 years. Dell was even cheaper. INTERNET STOCKS: WHERE WE'D LIKE TO SEE THEM COMPANY CURRENT PRICE FORWARD P/E* PRICE WE'D LIKE TO SEE TODAY FORWARD P/E* WE'D LIKE TO SEE TODAY** Amazon.com (AMZN) $75.75 244 $18 57 Doubleclick ( DCLK) $21.19 177 $5 42 Excite ( XCIT) $26.63 38 $24 35 Lycos ( LCOS) $24.94 75 $12 35 Yahoo ( YHOO ) $78.38 114 $27 38.5 Based on year 2000 EPS estimate *P/E reflects a 30% discount to the stock's secular growth rate They were expensive, yes, but they received nothing like the premium Yahoo! has enjoyed: At Thursday's close of 79, Yahoo trades at a multiple of 247 times this year's projected earnings of 32 cents a share, a pretty hefty premium to the company's projected earnings growth rate of 50% per year, whatever financial model you're using. Some of the other Internet valuations are equally ridiculous. Should you really be paying 75 times Lycos's (LCOS) expected year 2000 profit of 33 cents per share? At today's price of 25 and with losses last year of 12 cents, you're paying a lot for what you might get out of Lycos two years down the road. With a loss of 23 cents expected this year, Excite's multiple of 68 times next year's projected earnings of 38 cents per share is cheaper, but it's still rather gross. There are plenty of reasons stocks enjoy a premium. Inflation is at a 35-year low, and consequently, all stocks have enjoyed some premium in the last year. Microsoft and Dell have been trading at 50 and 33 times trailing earnings in the past 12 months, higher than their historical average, in other words. Some Wall Street analysts will of course tell you the Internet stocks are not enjoying a premium, or not much of one, anyway. To present the case that stocks with little or no profits are cheap, they have constructed detailed models of what earnings might be several years out, and they argue that present valuation reflects a generous discount on the price of those future earnings. But all that is really a justification for speculation. The real reason for the premium is more closely tied to the way the shares trade versus the way other stocks trade. According to CDA/Spectrum, about a third of Yahoo!'s 46 million shares outstanding is in the hands of institutions. In the case of Amazon, 23% is held by institutions. It's a very small amount of institutional ownership, relatively speaking, leaving a lot of shares in the hands of founders like Yahoo!'s Jerry Yang and David Filo, and Amazon's Jeff Bezos. What Bezos and Yang and Filo don't trade is fought over in the retail market. Roger McNamee, a general partner with investment firm Integral Capital Partners, echoed the fears of most cautious retail investors during his turn on CNBC Thursday afternoon, when he referred to the "uncertainty" resulting from all those retail investors fighting over the crumbs Yahoo!'s founders drop from the table. And here supply and demand play a large role. Individual investors in love with the Internet stocks realize that not only are there few shares to go around, but there are very few so-called "pure play" Internet stocks to invest in, such as Yahoo! and Amazon. That affects supply and demand, too. It's pretty clear, though, that the party is going to end sooner rather than later. The supply of Internet stocks is not going to drop off drastically. Though the current economic mood has put a damper on the market for public offerings, there's still billions in venture capital money pouring into the market for Internet startups. Many of those companies may not go public, but many others will. In time, the flood of new opportunities will be a tsunami sweeping over the Internet leaders, tarnishing their luster as investors' love affair with the entire sector dims. We have little doubt that the best of these companies, Yahoo! among them, will be able to rise above this onslaught. Those like Yahoo! that have staked out their claims early in cyberspace will reap the rewards of the Net's exponential growth -- and will likely play a major role in shaping the Net's development over the next several years. Jupiter Communications, a New York-based market research firm that tallies numbers on Internet trends, says that dollars spent in online shopping by U.S. consumers alone should reach about $37 billion by the year 2002 -- a drop in the bucket in a $30 trillion economy, but nonetheless proof that a substantial amount of consumer shopping will take place in cyberspace over the next few years. That's not even counting auto sales or plane tickets, increasingly popular online purchase items. It is, perhaps, that awesome promise that has seduced many investors into paying amazing prices for Internet stocks. Or maybe it's just speculative greed. You can't stop speculation, of course. These days it's a natural expression of a robust economy and higher consumer confidence. Many retail investors who might go out to a movie or splurge on expensive vacations are instead logging onto their online brokers to play the equivalent of Internet Lotto. But with the challenges facing young companies like Yahoo!, the notion that supply and demand will sustain these stocks' present valuations is more a sucker's bet than a gamble. Retail buyers know only that there's a fifty-fifty chance the euphoria will continue, and a fifty-fifty chance these stocks will meet the wild expectations held for them over the next three to five years. The earnest technology investor, on the other hand, likes to have some fundamentals on his or her side when gambling. If Yahoo! has the prospect of 50% secular growth for the next several years, maybe a premium of double that growth rate is fair. That would give the company a forward PE of 100, or a price of less than half of what it's trading at now. Now that the party may finally be over, we hope we'll see a buying opportunity like that in the near future. smartmoney.com

To: Skeeter Bug who wrote (16927)	9/11/1998 8:49:00 PM
From: llamaphlegm	Respond to of 164684

and this RELEVANTKNOWLEDGE ANNOUNCES TOP DOMAINS AND PROPERTIES FOR AUGUST Political News Events and Hurricanes Drive Visitation to News and Weather Web Sites Atlanta, September 11, 1998-RelevantKnowledge (r), Inc., the leading provider of online marketing intelligence, today announced its Top 25 Web domains and properties for the month of August. The company saw increased visitation and frequency to news and weather sites from July to August in the wake of President Clinton's acknowledgement of inappropriate relations with Monica Lewinsky, the U.S. bombings in Afghanistan and Sudan, and Hurricanes Bonnie and Earl. "August was an extremely interesting month for the Web. During a time when people typically are on vacation, visitors to topical Web sites increased dramatically, and time spent on the Web was at an all-time high of 10.1 hours on average per user," said Jeff Levy, CEO of RelevantKnowledge. Traffic to news and weather sites was a driving force behind these record duration figures. With the advent of Clinton's national confession, U.S. bombings, and hurricane season, duration to weather and news sites increased 61and 39 percent, respectively. Page views to news and weather sites also increased dramatically by 57 and 41percent, respectively. "This suggests that Web users looked at page after page of news and weather sites in search of information about current events. People invested significant time in following breaking news," Levy said. News Universe(1) Unique Visitors (000) Duration (Minutes) Avg.Page Views August 13,474 69.6 64.9 July 11,803 50.1 41.3 % Difference +14% +39% +57% Weather Universe(2) Unique Visitors (000) Duration (Minutes) Avg.Page Views August 7,936 31.9 20.8 July 6,465 19.8 14.7 % Difference +23% +61% +41% August's Top Domains and Properties: "Top 25 Dot.com Domains," which ranks the most highly trafficked single Web domains during the August1998 reporting period (8/3/98-8/30/98), are based on Unique Visitors. August data is projected to the latest RelevantKnowledge universe estimate of 53.4 million Web users in the U.S., aged 12 and older. August Site Persons 12+ Rank (in 000s) July Ranking 1 yahoo.com 25,670 1 2 aol.com 21,649 2 3 microsoft.com 19,507 3 4 netscape.com 16,304 4 5 geocities.com 15,485 6 6 excite.com 13,884 5 7 lycos.com 10,296 8 8 infoseek.com 10,241 7 9 msn.com 10,151 9 10 altavista.digital.com 9,220 10 11 hotmail.com 7,167 11 12 tripod.com 7,001 12 13 real.com 6,366 16 14 xoom.com 6,094 17 15 angelfire.com 6,039 13 16 zdnet.com 5,755 15 17 amazon.com 4,942 14 18 msnbc.com 4,819 21 19 weather.com 4,598 31 20 switchboard.com 4,586 20 21 cnn.com 4,413 25 22 pathfinder.com 4,307 22 23 abcnews.com 4,059 38 24 mapquest.com 4,024 19 25 mirabilis.com 3,959 24 "Top 25 Web Properties" consists of the top consolidated Web properties aggregated under one brand, including multiple domains that fell under that brand during the August 1998 reporting period (8/3/98-8/30/98) and is ranked by Unique Visitors. The data is projected to the latest RelevantKnowledge universe estimate of 53.4 million Web users in the U.S., aged 12 and older. August Property* Persons 12+ Rank (in 000s) July Ranking 1 Yahoo/Four11 26,128 1 2 AOL.com 21,784 2 3 Microsoft 19,614 3 4 Lycos Network** 17,649 7 5 Excite Network 16,554 5 6 Netscape 16,304 4 7 MSN/ Hotmail 15,557 6 8 GeoCities 15,485 8 9 Infoseek 11,010 9 10 Walt Disney Company 10,445 10 11 AltaVista 9,220 11 12 RealNetworks 7,228 12 13 CNET 7,151 13 14 ZDNet 6,683 14 15 Xoom 6,650 17 16 CNN 6,160 18 17 Switchboard 5,183 19 18 Amazon 4,942 16 19 MSNBC 4,819 25 20 Weather Channel 4,598 28 21 Mirabilis 4,582 22 22 Wired 4,325 20 23 Pathfinder 4,307 26 24 Xpics 4,173 21 25 Mapquest 4,032 23 Site data based upon aggregation of multiple domain names. A complete list of domain names/URLs, for each site can be found at relevantknowledge.com. * The Lycos Network now includes the Whowhere and Angelfire properties. ~ The RelevantKnowledge panel under-represents AOL members and traffic to aol.com. In addition, RelevantKnowledge does not measure usage within the AOL proprietary network. Note: All numbers are estimates and are subject to the limitations inherent to survey methodology, such as sample variability, data collection flaws and non-respondent bias. The effect of this cannot be determined to any precise mathematical degree. Note: A complete methodology explanation is available on the RelevantKnowledge Web site at rkinc.com. About RelevantKnowledge: RelevantKnowledge (www.relevantknowledge.com, 1-888-4RK-0001) is the only company of its kind to offer a randomly selected, unified panel of business, home and college Web users, representative of the U.S. World Wide Web universe. The company's Web Report, LifeGraphics, Site Reports, Vertical Markets Reports, Ad Networks Reports and custom analyses enable advertisers, advertising agencies, Web publishers, and industry and financial analysts to better refine site content, more accurately target ad messages and maximize media efficiencies. The company was founded at the Advanced Technology Development Center on the campus of The Georgia Institute of Technology. Bringing together a team of experts from the fields of research, panel management, media, technology and advertising, RelevantKnowledge provides the standard for Web audience measurement and market insight. ### (1) News sites include abcnews.com, allpolitics.com, chicagotribune.com,cnn.com, drudgereport.com, foxnews.com, latimes.com, msnbc.com, nytimes.com, usatoday.com, washingtonpost.com (2) Weather sites include aws.com, accuweather.com, coastalnet.com, earthwatch.com, groundhog.sprl.umich.edu, hurricanes98.com, intellicast.com, marineweather.com, met.tamu.edu, nws.noaa.gov, rainorshine.com, storm98.com, travelersweather.com, weather.com, weather.lycos.com, weather.yahoo.com, weatherconcepts.com, weatherlabs.com, weatherpost.com, wunderground.com, wxp.eas.purdue.edu.