A little news I got from my Quote.com subscription.
*CYBERCASH LOOKS TO 'ELECTRONIC WALLET' FOR ITS FUTURE GROWTH [Dow Jones Online
News,1065 words]
By Johanna Bennett, Staff Reporter
NEW YORK -(Dow Jones)- If you bought shares of almost any Internet
stock, 1998 was probably a very good year. But if you owned shares of
Cybercash Inc., it was probably a bit of a let down.
Shares of the Reston, Va., Internet-payment company had a
disappointing year, falling to an all time low at a time when the
public's manic enthusiasm for Web stocks left companies like Yahoo Inc.
(YHOO), eBay Inc. (EBAY) and Amazon.com Inc. (AMZN) with values large
enough to fund a small, third-world nation.
But some analysts contend that Cybercash's relatively cheap stock
price, coupled with the company's new one-click shopping service -
commonly referred to as an "electronic wallet" - are attracting
investors looking to build positions in low-cost Web-related stocks.
In the last quarter, Cybercash shares (CYCH) rose almost 300% to more
than 20 a share. The stock closed Friday at $19.75.
"They are not as cheap as they were a few months ago," said Rick
Barry, an analyst with J.P. Turner & Co. "But it is one to keep an eye
on."
But Banc Boston Robertson Stephens analyst Gary Craft has rated the
stock as "attractive," insisting that the current valuation is
reflective of the company's worth.
"It's a little early in the the ball game," he said.
Traditionally, Cybercash has been known as a company that provides
services and software for secure financial transactions over the
Internet, particularly payment-processing services for online merchants.
But tremendous importance has been placed on the company's new
electronic wallet, Instabuy.
Like its old-fashioned counterpart, an electronic wallet holds
personal identification, credit-card information and even an address
book. Shoppers can click on an item they want to buy and order it by
clicking on their wallet, bypassing the tedious necessity of repeatedly
providing Internet merchants with billing and shipping information.
The technology is considered the newest accessory for Web surfers.
And the market for cyber billfolds has flared into a virtual
free-for-all as some of the Internet's biggest players rush to develop
their own versions.
The rollout of Instabuy is costing $10 million, paid for via a
private placement by the company. But the marketing efforts going into
Instabuy means sacrificing revenues and pushing back profitability until
next year, said James Condon, company chief operating officer and newly
appointed president.
Cybercash reported a loss of $1.71 a share for the nine-month period
ending Sept. 30 on revenue of $8.1 million. The same period in the
previous year saw losses of $1.91 a share on revenue of $2.5 million.
Quite a change from two years ago.
Then, Cybercash, touted by some as the "father of the electronic
wallet," was in the unfortunate position of being a good idea at the
wrong time.
The company's initial public offering in February 1996 was a hot
investment. Priced at $18 a share, the stock jacked up to $64 within a
week, largely because of the market's euphoria for anything associated
with the Internet.
But the public's fascination for electronic commerce took longer to
kick off than many expected. In those days, the notion of buying books,
CDs, clothing or computers over the Internet was subverted by the
public's fears over security and privacy, said Robert Herwick, a fund
manager from the San Francisco Bay area.
"You have to understand, when (Cybercash) started out, they were
dealing with a very different world," Herwick said.
Throughout 1997, several analysts downgraded their ratings for
Cybercash, and the stock price began to fall. While other Internet
shares hit all-time highs, Cybercash shares hit bottom in October of
last year with an intra-day price of just over $6 a share.
Part of the problem, according to Condon, the company's chief
operating officer and president, was that Cybercash, though a well
recognized name among online merchants, was largely unknown to
individual investors.
"The companies that were rising the fastest, like Amazon and America
Online Inc. (AOL), are all consumer-branded companies. The stocks'
upsurge did not come from institutional customers, but individuals.
Cybercash has never been a consumer-driven company," Condon said.
Now, however, it seems the electronic-commerce market has finally
caught up. During the fourth quarter of 1998, prices for several online
shopping Web sites shot up, riding the market's enthusiasm over online
sales estimates for the holiday shopping season.
Cybercash eventually was carried along for the ride.
But all is not entirely clear for Cybercash, said Herwick, the San
Francisco area fund manager.
Portal Web sites have decided to get into the electronic-commerce
craze. They, along with a host of start-up companies, also have
developed electronic wallets, or similar technology, and will compete
with Cybercash for a share of the market.
"The good news is that the market (for e-commerce) is finally
developing. The bad news its that they have a lot more competition than
they did a year ago," Herwick added.
But Cybercash is banking that online shoppers aren't looking for
variety in electronic wallets, but rather want one universal wallet that
can be used at a variety of sites.
"I refuse to believe that every merchant and person out there will go
to Yahoo only," said Condon, Cybercash's chief operating officer and
president. "People are going to say, 'I don't want 13 passwords. I want
one universal wallet,'" he said.
That means marketing Instabuy to consumers, as well as merchants.
The software will be available this month via Cybercash's Web site
(www.cybercash.com), as well as through deals Cybercash is finalizing
with various financial institutions. Credit cards associated with the
institutions will be issued with Instabuy already encrypted and
credit-card holders will have the option of going online and signing up
for the service.
Cybercash has long been affiliated with Banc One's First USA unit.
And last month, the company signed an agreement for secure online
payment services with Barclay PLC Merchants Services unit.
Meanwhile, Cybercash's competition is already out the door.
Late last year, America Online Inc., of Dulles, Va., rolled out its
wallet - called Quick Checkout. A week before Thanksgiving, Yahoo
unveiled Yahoo! Shopping, an area of the portal devoted to hundreds of
merchants sharing a common wallet system. And Excite Inc. (XCIT) is
pushing Express Order.
"It's a market-share battle now," Herwick said. "Two years ago it was
a market development battle. Now it is a market-share battle."
-Johanna Bennett: 201-938-5670
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