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Technology Stocks : e-Commerce Cats and Dogs -- Ignore unavailable to you. Want to Upgrade?

To: AugustWest who wrote (160)	11/18/1998 8:58:00 PM
From: jjs_ynot	Respond to of 312

Well, the C&D portfolio was up 7 percent today and KTEL was down 2.

To: AugustWest who wrote (160)	11/19/1998 8:35:00 AM
From: jjs_ynot	Read Replies (1) \| Respond to of 312

DRIV news Today in IBD New America: DIGITAL RIVER INC. Eden Prairie, Minnesota Shipping Software Straight To Your Computer Date: 11/19/98 Author: Arthur Goldgaber While Dell Computer Corp. and online book retailer Amazon.com Inc. are successfully selling products over the Web, they still have to ship their goods by mail or overnight delivery. Digital River Inc. gives software developers and retailers a new option. Using a process called electronic software delivery (ESD), it ships software programs through the Internet directly to customers' computers. The company isn't a retailer. ''We are really an outsource provider that specializes in managing electronic commerce,'' said CEO Joel Ronning of his automated back-end operation. Digital River's computer system consists of a large central server containing 131,000 software programs, such as Lotus Notes, WordPerfect and Act! The system processes software orders, delivers them and tracks information on customer transactions. Major software makers that have signed up include Lotus Development Corp., Corel Corp. and Symantec Corp. Microsoft Corp. has yet to sign a deal with any ESD company. Here's how the system works: When a customer buys a program from Lotus' Web site, for example, he or she is transferred to Digital River's server, which handles the actual transaction. A user interface, though, makes it look as though the customer is still on Lotus' site. Digital River collects the entire payment, keeps 20% for its commission and sends the rest to Lotus. For its retail clients, Digital River sets up and runs Web ''stores'' under the retailers' banners. It offers these clients a selection of software titles from its inventory and gives them 15% of sales. The company's computer system also gathers data on consumer purchases and sends it back to the retailer. The data can be used for marketing or tracking inventory. So far, Digital River has signed up 2,071 clients by selling them on the advantages of online distribution. Sending software electronically eliminates packaging and shipping costs and prevents clients from getting stuck with excess inventory, Ronning says. ''It's attractive to everybody involved because you are squeezing a lot of costs out of the process,'' he said. Digital River's system now handles an average of 750 transactions daily. Ronning assumes most of the sales are to corporate customers, because activity drops off noticeably on weekends. In the third quarter - its first since going public in August - the company lost 26 cents a share, vs. a loss of 11 cents a year before. Sales jumped 747% to $5.7 million. The concept of selling software over the Internet is still in its infancy. Roughly $259 million worth of software will be sold online this year, says research firm Jupiter Communications. That's just a fraction of the entire $5.5 billion consumer software market. Online software sales, however, are expected to grow an average of 95% a year, hitting $2.4 billion by '02. Digitally delivered software will account for about 25% of that, says Jupiter analyst Ken Cassar. And Digital River is capitalizing on that growth. Analysts expect the company to lose $1 a share this year. But it should earn 4 cents in '00, First Call says. Digital River trades as DRIV near 13. One barrier to broad consumer acceptance of electronic software delivery is the slowness of data transfer over phone lines. ESD is effective for programs that use up to 40 megabytes of space. Digital River still mails programs that require more space, such as graphics-rich computer games. ''Limited bandwidth is really limiting the growth of ESD right now,'' Cassar said. But data transmission, he adds, will speed up in the next few years as cable modems and faster Internet connections become more common. The second biggest challenge is offering a large enough product selection to persuade shoppers to buy online. To do that, online software merchants must convince software publishers to license their programs. Signing up software makers has proved to be a yeoman's job. ''It has taken us over two years to license all these products,'' Ronning said. ''If we were bad guys, we could do all sorts of naughty things with their applications. But these software companies trust us to manage the licenses for them.'' Digital River has signed up more software developers and offers several more titles than either of its main rivals, Rights Exchange Inc. and Preview Systems , both of which are privately held, says analyst Keith Benjamin of BancBoston Robertson Stephens. ''There are only a couple of competitors that have any critical mass in terms of number of software titles and number of accounts,'' he said. To keep its lead, Digital River spent $3.1 million on sales and marketing in the third quarter. ''The largest portion of that went to building brand awareness in the publisher market,'' Ronning said. The company has a staff of 22 people who market its service to software makers. It now plans to expand its sales and marketing efforts to win more retail clients.