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To: Lizzie Tudor who wrote (36372)	1/24/1999 3:23:00 PM
From: H James Morris	Read Replies (2) \| Respond to of 164684

Michelle, I forgot one other difference. I went to Stanford only because they could spell. Isn't the University of California @ Berkeley, still spelled the same? Ps Great school. Bad speller's.

To: Lizzie Tudor who wrote (36372)	1/24/1999 7:54:00 PM
From: Glenn D. Rudolph	Respond to of 164684

The Internet Capitalist SG Cowen Internet Research 21 and Internet tools software to really hit stride. Stay tuned. Delta Embraces, No, Bear Hugs The Internet Though we often preach aggressiveness to corporate executives who are trying to determine their Internet strategy, more often than not, their reflexive response has been “wait and see”. This is the reason we were so surprised by Delta Airlines moves this past week; Delta Air Lines announced that it is imposing a $1, one-way surcharge on domestic tickets purchased through travel agents, but not on tickets purchased directly over its Web site. We are big believers in the power of incentives to motivate, and we've now got one of the most powerful motivators around shaking up the airline industry and causing, you guessed it, some serious disintermediation in this industry's value chain. Goodbye travel agents. Though Delta suggested officially that it needed to cover rising ticket distribution costs (which have increased to $1 billion in 1998) and reservation system booking fees (which have increased 280% since 1990), the real reason, of course is to weaken (and eventually eliminate) the role travel agents in the industry. The rationale is patently obvious to fans of industry value chains: the more inefficiency Delta can drive out of the process of flying people to and fro, the more margin Delta can absorb from the industry. Unsurprisingly, United Airlines announced that it, too, was considering such a move, though we're hard pressed to imagine a scenario in which any airline (even regionals) would not follow this path, since even $1 per ticket differences can result in a measurable comparative advantage (the only advantage that matters). We'll be keeping a close watch on how quickly the rest of the industry turns. Valuation Watch The Pause That Refreshes? The ongoing deflation in the Internet sector (Yahoo! and Amazon are off nearly 50% in the last two weeks) got us to thinking about whether or not all those institutional clients who don't yet have exposure to the Internet sector were telling the truth when they said they were waiting for the stocks to “come back to earth”. Well, sea level, dead ahead. The question we think, is not “are these stocks going to zero?” (we think we're seeing too many “I told you so's” in the press for this to be a real Internet bear market), but rather, at what point does it make sense to think about getting some exposure to these hyper-growers? In the forest vs. trees game, however, it seems the trees have made a nice comeback and have eked out a small lead over the forest. Though a healthy shake-out is probably in all of our best interests in this sector (we just wish there would be a better separation of the wheat from the chaff), we think it's important to keep view of the forest these days (that we're still in the early innings of this game) and try to block out the relatively unimportant trees (that December's upside surprises may not be as huge as whisper numbers suggested). To this end, we'll share a telling anecdote from way back in 1994, when we had the pleasure of covering Microsoft. In a conversation with a smart buy-sider about how many units of Windows 95 would ship in the first quarter after it availability, she got stuck on whether it would be something like X or .75X. We spoke at length about the importance of multi-tasking, about the new serial bus features, about various consumer-focused functions, and about corporate and OEM demand. At the end of the day, she couldn't get comfortable with all of these things and she didn't buy the stock. Of course, history now shines its cruel light on that decision, thanks to Microsoft's 1100%