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To: H James Morris who wrote (36332)	1/24/1999 7:49:00 PM
From: Glenn D. Rudolph	Respond to of 164684

The Internet Capitalist SG Cowen Internet Research 15 respectively). The number of advertisers increased “only” 100 q/q, to 2,300, thanks to management's decision to establish closer relationships (read: more money) with their existing advertising partners, a strategy illustrated clearly in DCLK's average revenue per advertisers figure, which jumped 25% in Q4 over Q3. Interestingly enough, DoubleClick is starting to break out sponsorship revenue (multi-million, fixed, multi-year deals with advertisers); sponsorship revenue grew 57% sequentially to $5.5 million in Q4 and reflects both the maturation of the medium (greater contract lengths, smarter advertising buys) as well as a push on DCLK's part to generate this type of revenue (since it increases revenue visibility nicely). We're Keeping The Buy Rating… We admit to being perhaps too conservative in our one quarter-ago analysis of how the Alta Vista deal would act as an over hang on the stock. Obviously, the stock was telling us something about the whens and hows of yesterday's Compaq deal as it advanced from its 20s low three months ago, but we weren't listening and missed our chance to upgrade DCLK to a Strong Buy after their blow-out September quarter. Now that the stock is in the mid 90s, the market is looking jittery for these Internet stocks, another great quarter has been reported, and DoubleClick's position looks to be even more unassailable in the Internet advertising services space, you'd think we wouldn't hesitate to upgrade, but we are. Our maintenance of the Buy rating reflects our strategy to keep our powder dry on this one until we get just a bit more data on those drivers of the model in 1999: Compaq's investment in Alta Vista, the success of the Closed Loop product, the continued ascendancy of DART, and the critical mass point in their International business. We suspect all of these factors will tip their hand one way or another in 1999 (our early bet is that the tip will be positive) so until then, we stick with the Buy rating. On the price target front, we'll admit to being a progenitor of some creative valuation analyses in these Internet names, but we think that a combination of discounted earnings, cash flow, or a revenue multiple approach can get investors (with a longer term time horizon) to a $125 price target for DCLK. We're happy to share these calculations with you; please contact your SG Cowen salesperson or a member of our team for a copy. Excite The Big news out of Excite this week was, of course, the @Home merger, the specifics of which we discuss below. In addition to that, however, Excite reported their Q4 operating results, which, though a dénouement, were pretty solid. Herewith, some highlights from both: @Home announced this past week that it was purchasing Excite for about $7 billion, or 62 million ATHM shares (1.042 ATHM shares per XCIT share) in a purchase transaction that should close within the next 90 days. George Bell, Excite's CEO will report to Tom Jermoluk (@Home's Chairman and CEO) and receive a board seat; no/few employees will be eliminated, and operations will remain in their separate (but next door) locations. The Excite@Home service will be available to @Home subscribers sometime in @H:99 (perhaps Q3), with marketing plans for the combined service still in development. The Combined P&L Looks Awfully Attractive, Though Relatively Distant… @Home suggested that the deal would be immediately accretive to their bottom line and 15-20% accretive to their model in 2002. According to management, the combined 2002 P&L will show something like $2 billion in revenue and 30-35% operating margins, with subscription revenue accounting for 40-45% of