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Technology Stocks : INFOSEEK (GO) -- Ignore unavailable to you. Want to Upgrade?

To: Tom Klempay who wrote (8208)	11/13/1998 10:52:00 AM
From: Chemsync	Read Replies (3) \| Respond to of 9343

Disney: All systems 'Go' for Infoseek Posted at 9:09 p.m. PST Thursday, November 12, 1998 BY ADAM LASHINSKY Mercury News Staff Writer It almost never has been fashionable to be bullish on Infoseek Corp. (Nasdaq, SEEK). And it's become even less popular since Walt Disney Co. (NYSE, DIS) agreed to extract its pound of flesh from -- and dilute shares of -- the search engine and Internet directory company in return for an eventual controlling stake. Wall Street's lack of affection for the Sunnyvale-based company stems from its also-ran status in the ''portal'' business and Infoseek's false starts first with trying to charge for queries and then by attempting to collect tolls for subscriptions. The result is that Infoseek, while surviving, largely has sat out the Internet-stock craze, at least on a relative basis. For example, as stock in Yahoo Inc. (Nasdaq, YHOO) has tripled since April, Infoseek's has been in a holding pattern. Before it announced its deal with Disney in June it traded as high as $45, but then fell below $20 and rose again to $33.25, where it closed Thursday. But with Disney having the opportunity to take a controlling stake and a major product rollout in the offing, it's unlikely Infoseek's stock can make new highs until it proves itself. So the question becomes, how likely is it that Infoseek -- with Disney's help -- is going to be an Internet contender? After taking in the 45-minute act earlier this week of Les Wright, Infoseek's chief operating officer, at the American Electronics Association's annual financial conference in San Diego, one just might be able to imagine Infoseek's survival. To wit, come March, Infoseek and Disney formally will unveil their new Internet portal, the Go Network, and will unleash the ferocity of the Disney marketing machine. According to Wright, Disney will make the ''Go'' launch one of its famous ''synergy events,'' whereby all Disney properties, such as its theme parks and film studios (and undoubtedly its ABC News infotainment programs), will heavily promote Go and Infoseek. Go will result from the merger of Infoseek and Starwave Corp., Disney's 91 percent owned joint venture that runs its ABCNews.com, ESPN SportsZone and Disney.com Web sites, among others. Wright contends that Infoseek, with 20 million unique users, already isn't far behind leaders Yahoo and America Online Inc. (NYSE, AOL), both of which have around 25 million unique users. But Infoseek has spent minimally on promoting itself in mainstream media. That will change when it initiates a national television ad campaign in December, the beginning of a five-year, $165 million promotional budget. The point to consider here is that despite ''first mover'' advantage by the likes of Yahoo, Disney has some first-mover benefits of its own as a decades-old brand. And people forget how young the Internet industry is. ''The people who are going to drive electronic commerce aren't even on the Web yet,'' argues Randy Komisar, an Infoseek shareholder and one-time executive with a different Go, the failed pen-based computer maker Go Corp. ''Those people know Disney a lot better than they know Yahoo.'' But despite Yahoo's 25 percent lead over Infoseek in users, there's just no comparing the two companies' valuations. Infoseek, with a pre-merger market capitalization of $911 million, trades for about 12 times its annualized sales (based on its most recent quarter) of $76.8 million. That's an astonishingly high multiple to sales. But Yahoo, with a market cap of $16.2 billion, is worth about 76 times its annualized sales of $214 million. The Infoseek-Starwave-Disney deal is set to close Wednesday, when shareholders vote on what at this point is a foregone conclusion; investors who don't like the deal have had five months to dump their shares. Don't count out Infoseek. Contact Adam Lashinsky at the San Jose Mercury News, 750 Ridder Park Drive, San Jose, Calif. 95190, or siliconstreet@sjmercury.com or 408-271-3782.