BANCBOSTON ROBERTSON STEPHENS
Keith E. Benjamin, CFA - 415-693-3285
mailto:keith@rsco.com
December 11, 1998
The Web Report #50
This week, the Internet.com's index closed at 235.37, up 10.3% from the
end of last week and up approximately 144.7% over the same period last
year. For comparison, the NASDAQ ended the week up 3.2% over last week
and up 26.3% from the same date last year.
EARLY CHRISTMAS PRESENT - Congratulations to my wife Nancy, who
continued to carry the team by delivering our first child, Bruce Wind
Benjamin, weighing in at 7 lbs. 12 oz.
This must explain why the stocks kept going up. The big stocks regained
most of the ground given up last week, which makes us wonder if the
correction was enough. Psychologically, we would like to see a deeper,
longer correction during this period going into the end of the year.
Still, we remain bullish on business, if not every stock.
SOME GOOD NEWS* A couple of our companies had news this week that hinted
at even bigger news ahead, in our view.
Network Solutions reaching new highs.
Network Solutions announced a deal with the Centraal Corporation, which
develops and markets RealNames, an alternative Web-site naming system.
Network invested $4.2 million in Centraal, along with an investment of
an additional $8 million from Compaq, Amerindo Investment Advisors, and
others. Network Solutions has the exclusive right to market RealNames
through existing NSOL and ISP partner channels and will keep an
undisclosed percentage commission. We don't expect the deal to impact
our 1999 estimates, but it could add to 2000 and beyond as another
high-growth product for the company.
The RealNames technology links IP addresses of specific Web pages, which
could be part of a larger site, with names that it licenses and can be
typed directly into search engines and browsers. For instance, a user
could type 'Sony Handycam' into the address bar of a browser and go
directly to that page within the Sony Web site.
We would not be surprised to see Network Solutions make additional
announcements before the end of the year, including a possible
distribution agreement with one of the big networks to achieve broader
reach for Network's products. We believe this type of announcement could
reinforce Network's unmatched competitive position. Despite worries
about potential competitors, however, so far none have stood up. In
fact, we believe companies, which would fall into the possible
competitor category, could wind up being partners with Network Solutions
instead.
Networks Solutions was up $28, or more than 45%, during the week. The
stock appears to be moving past concerns of new competition, which we
believe will not materialize for many quarters, if not years. Even
then, we expect Network Solutions will remain the leader by a wide
margin. At current price levels, we believe the stock could still rise
substantially and still be relatively inexpensive, as it is one of the
few Internet companies with current earnings.
AOL - Let your fingers do the walking
AOL announced a new Yellow pages deal with Bell Atlantic and GTE this
week. AOL receives a guarantee of at least $31 million over three years
to distribute the yellow pages, plus some portion of the upside from
advertising revenue. AOL continues to capture more money per customer
as Web advertising budgets grow.
We still expect broadband news around year-end, and would not be
surprised to see a combined announcement, with AOL naming several
broadband distribution partners.
AND SOME BAD NEWS*
SportsLine - Q4 still looking a bit light, look to Q1/Q2 for better
traffic and ad revenue
We still believe SportsLine's Q4 advertising revenue could be slightly
lower than our estimate, with about $500k at risk due to the absence of
the NBA season. Furthermore, we estimate traffic should be flat from
Q3, without the estimated 1 million daily page views expected from the
NBA that we believe will not materialize. We believe sell-through might
actually be ahead of plan, mitigating against some of the traffic
shortfall.
We hope the stock has already hit a low on negative Q4 news. We believe
at these levels, SportsLine would make an attractive takeover candidate
for one of the network companies. We expect more positive news from the
AOL deal by the end of Q1:99, impacting revenues by Q2:99. SportsLine
has formed a new 'AOL' division of 20 full-time people, mostly marketers
and engineers, to ensure the success of this important distribution
deal.
We also expect positive news in 1H:99 from SportsLine's CBS
relationship, as the CBS Plus project takes hold. CBS Plus is an
initiative on CBS's part to formally organize an effort to cross-sell
advertisers across different media. We believe a relatively small
improvement in cross selling could yield big upside for SportsLine. We
estimate total sports advertising on various CBS properties is in the
range of $800-$900 million, so even a small percentage allocated to the
Internet would be a big deal.
THE BIG PICTURE - The Internet companies appear to be taking mind share
and revenues from existing media and commerce companies, while creating
some additional value through efficiency of the Web. Thus, our
benchmark for valuation remains those non-Internet companies that have
been around long enough to allow calculation of value based on current
earnings.
This week the market capitalization of the 50 companies in the
Internet.com's index (excluding Cisco) is approximately $138.5 billion.
This compares to the top 20 media companies, which have a combined
market capitalization of approximately $401.8 billion. In the retail
category, Wal-Mart's market capitalization is approximately $170.7
billion.
Rating 12/10 12/3 1-Wk 52-Wk Chg
Chg High 52Wk Hi
12/10- to 12/10
12/3 Price
Amazon AMZN BUY 213 1/8 189 1/2 12% 233 1/8 -8.6%
Am.Online AOL SBUY 90 1/16 83 5/8 8% 96 1/4 -6.5%
CMG CMGI LTA 71 3/4 69 * 4% 91 3/4 -21.8%
CNET CNWK BUY 47 3/8 45 * 5% 74 1/2 -36.4%
Dig.River DRIV BUY 22 3/4 18 1/8 26% 32 -28.9%
Dialog DIALY MP 4 4 1/3 -8% 16 1/4 -75.4%
Dbl.Click DCLK MP 34 3/8 33 5/8 2% 77 1/8 -55.4%
Ebay EBAY BUY 186 1/8 187 0% 234 1/8 -20.5%
E*Trade EGRP BUY 27 1/4 23 1/5 17% 35 1/4 -22.7%
Excite XCIT BUY 51 3/8 49 1/4 4% 58 5/8 -12.4%
Gemstar GMSFT BUY 57 3/8 66 1/2 -14% 69 1/6 -17.1%
Getty GETY BUY 15 16 4/5 -11% 28 1/4 -47.1%
Lycos LCOS BUY 56 4/7 50 1/2 12% 68 3/4 -17.7%
NetGravity NETG BUY 16 4/7 17 3/4 -7% 32 1/2 -49.0%
Net.Sol. NSOL BUY 88 3/4 59 3/8 49% 91 1/4 -2.7%
NewsEdge NEWZ MP 8 4/7 7 7/8 9% 19 3/4 -56.6%
N2K NTKI MP 14 11 2/3 20% 34 5/8 -59.6%
Onsale ONSL BUY 39 7/8 38 7/8 3% 108 -63.1%
Prv.Travel PTVL BUY 15 7/8 16 -1% 44 -63.9%
Infoseek SEEK MP 40 32 7/8 22% 49 -18.4%
SportsLine
USA SPLN BUY 18 1/4 16 14% 39 5/8 -53.9%
Yahoo! YHOO BUY 192 3/4 183 3/4 5% 227 3/4 -15.4%
Internet Stock
Index ISDEX 235.37 213.33 10.3% N/A 144.7%
NASDAQ Composite
Index COMQ 2015.96 1954.33 3.2% N/A 26.3%
To improve the alignment of the table:
1. Highlight the data.
2. Go to the Format menu and choose "Font"
3. Choose "Courier" and press "OK".
(1) Change based on last 12-month's performance.
Source: AT Financial Information and BRS Estimates
BancBoston Robertson Stephens maintains a market in the shares of
Amazon.com, CMG Information Services, CNET, Dialog, Digital River,
DoubleClick, Ebay, Inc., E*Trade, Excite, Gemstar, Getty, Infoseek,
Lycos, Microsoft, NetGravity, Netscape, Network Solutions, NewsEdge,
N2K, Onsale, Preview Travel, SportsLine USA, Yahoo! and has been a
managing or comanaging underwriter for or has privately placed
securities of Digital River, Ebay, Inc., E*Trade, Excite, Onsale, and
SportsLine USA within the past three years.
FOR ADDITIONAL INFORMATION, PLEASE CALL YOUR BANCBOSTON ROBERTSON
STEPHENS REPRESENTATIVE AT (415) 781-9700.
Unless otherwise noted, prices are as of Thursday, December 10, 1998.
The information contained herein is not a complete analysis of every
material fact respecting any company, industry or security. Although
opinions and estimates expressed herein reflect the current judgment of
BancBoston Robertson Stephens, the information upon which such opinions
and estimates are based is not necessarily updated on a regular basis;
when it is, the date of the change in estimate will be noted. In
addition, opinions and estimates are subject to change without notice.
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described in the forward-looking statements. Factors that might cause
such a difference include, but are not limited to, those discussed in
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Copyright * 1998 BancBoston Robertson Stephens Inc. |
