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Technology Stocks : EarthWeb IPO -- Ignore unavailable to you. Want to Upgrade?

To: Don Westermeyer who wrote (65)	11/12/1998 6:59:00 PM
From: Secret_Agent_Man	Respond to of 177

November 12, 1998 EarthWeb: It's Just a &$%*@! Web Site By Tiernan Ray THE IPO MARKET, and especially that part of the market that caters to the needs of young Internet companies, is truly a friend to entropy. In the past couple of years the term "services" has cropped up in the business descriptions in many a public offering. It is a term meant to suggest a world of benefits that a surfer on the World Wide Web can enjoy when he goes to a Web site, over and above the basic privilege of clicking on hyperlinks. In a few instances, the facts themselves almost live up to what the term services is trying to connote, namely a new kind of service economy evolving on the Web, as in, for example, successful e-commerce ventures like Amazon.com (AMZN), or traditional online services like America Online (AOL). More often, the term comes off a bit forced, as when Yahoo! (YHOO) declares in quarterly filings that its smart, colorful Web guide is actually a collection of "navigational tools and information services that are targeted to particular interests." But the most hysterical bastardization of the term services to come down the pike is climbing the charts, up 20 points today, to close at $69.25, up almost 400% from yesterday's offer price of $14. We're talking, of course, about Web publisher EarthWeb (EWBX), which was brought public by J. P. Morgan, along with Bear Sterns, Volpe Brown and Wit Capital. (Wit is the new-style, New York-based venture capital firm that made a splash when it took Spring Street Brewing public two years ago in the first online IPO.) EarthWeb's closing price gives it a market capitalization of just over half a billion. Of course, EarthWeb has the anemic earnings you'd expect of an Internet startup: Net losses increased three cents to a dollar per share in the first six months of this year. That investors would pay $68 per share for a Web company with EarthWeb's woefully small advertising revenue -- just $974,000 as of June -- is a bit puzzling; even eBay (EBAY), a stock we have been loudly skeptical of, is expected to do something like $13 million to $15 million in revenue in the current quarter. But the most perplexing part of it all is the new heights to which EarthWeb's spin has raised the craft of hyping what is basically just a Web page. It's a conceptual work of art so totally ungrounded in reality it recalls the Soviet artist Tatlin, whose monumental public works projects could never be built. EarthWeb's stock in trade is a bunch of Web sites that it has been acquiring with cash and which offer links to other Web pages where programmers can find sample computer programs and program code. They include such hot spots as "www.htmlgoodies.com." The company runs some chat sessions where programmers can rap about code they've written, and earlier this year the company spent $600,000 for Datamation, an online trade magazine for information technology professionals. All good stuff, to be sure. But there's nothing here to resemble what the prospectus describes as "online services to IT professionals in an integrated business-to-business environment that addresses their needs for content, community and commerce." Come on. The company's "technical resources" for programmers is just a page of links; its training materials, including the stuff on the Datamation Web site, is the usual bunch of technical trade magazine articles. Its "3,000 interactive technical discussion threads," and "online knowledge repository" are just like the Usenet newsgroups that are already available on the Net and used by programmers extensively. Big deal. Far be it from us to denigrate a cyberpublisher from our own glass house. But there just are no services in EarthWeb's current business. There is an idea for some services, a lot of nice language and a lot of ambition. Maybe EarthWeb can acquire some more companies with the proceeds of its offering and flesh out the business plan. Right now, it is just a very small online publisher going up against really big competition from other online publishers, like C/Net (CNWK) and Ziff-Davis (ZD). Readers will probably enjoy EarthWeb's content just as much as all the others. Maybe it will even turn into earnings some day. In the meantime, the only ones being serviced are J. P. Morgan, and of course, the suddenly rich insiders who own EarthWeb's stock.