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Strategies & Market Trends : Three Amigos Stock Thread -- Ignore unavailable to you. Want to Upgrade?

To: Elllk who wrote (13432)	2/13/1999 2:44:00 PM
From: Sergio H	Read Replies (3) \| Respond to of 29382

Larry, VRIO keeps getting attention. Here's an article that might be of interest to you if you haven't seen it already. iionline.com BID & ASK: Verio -- Value on the Internet TODAY I. I. A N A L Y S I S Radar Screen on Insider Action SELL SIGNALS UPDATE: Guitar Center Pops String SELL SIGNALS UPDATE: Paychex to Pay the Piper Wacky Tibacky: Philip Morris Unfairly Smoked UPDATE: I-Flow to Flow Higher Fore Systems: A Tempting Telecom Takeover Target UPDATE: Eureka! A Profitable Biotech! C O M M E N T A R Y BULL'S-EYE: Platinum Technology Goes for Gold BID & ASK: Verio -- Value on the Internet TAUB TALK: Where is the Internet Wave Headed Now? DID YOU MISS A DAY? Last 7 Days Archived -------------------------------------------------------------------------------- Tom Byrne (2/11/99) It is no secret that I hate etailers, companies that sell their goods over the Internet. There are too many of them, margins are way too slim (for those lucky few who even have margins) and the barriers to entry are practically non-existent. I have not recommended one etailer since the Internet became a force in our lives. But that does not mean I spurn the Internet. On the contrary, I have recommended several Internet companies, including CMG Information Services (NASDAQ: CMGI) three years ago, when it was under $2 per share, and more recently, Broadcast.com (NASDAQ: BCST), InfoSpace.com (NASDAQ: INSP) and PSINet (NASDAQ: PSIX). All four companies have unique business models that are a play on the growth of the Internet as a whole, not a play on the growth of people using the Internet to buy books, music or anything else. Verio is Very Cheap My latest recommendation, Verio (NASDAQ: VRIO) follows the same investment thesis. It has a unique business model that is a play on the growth of the Internet. In fact, the more Web sites there are, the better business will be for Verio. All those Web sites need a home and that is exactly what Verio provides. Verio is the world's largest domain-based Web-hosting company with an emphasis on serving the small and mid-sized business market. Verio has Web-hosting facilities and provides engineering support in 41 of the top 50 U.S. markets under the Verio brand name and provides Web-hosting services to customers in more than 170 countries. I think Verio is in a great business. Everybody and their uncle have a Web site, but unless they buy file servers and support their Web sites internally, they need a place to keep them. It is a simple business with enormous demand. And Verio's recent earnings announcement caused the stock to drop three points to $28, which I think is an attractive entry point. Fourth Quarter Results On February 10th, Verio reported a larger-than-expected fourth quarter loss of $1.02 per share. Analysts were expecting a loss of $0.96 per share (estimates ranged from $0.96-$1.09) which is why the stock took a tumble. But sales exploded to $37.1 million, up 171% from a year ago and the results did not include Hiway Technologies, which was acquired on January 5. The completion of the Hiway acquisition helped Verio improve its customer account base to over 260,000. Also in the Web-hosting arena, Verio's acquisition of WWW-Service AG in Germany established Verio as a key presence in Europe. During the quarter, gross margins improved to 57%, up from 55% in the third quarter. The company also took a $3.4 million charge for cutting 250 jobs. Verio spent $63.4 million for six acquisitions that closed in the quarter and another $3.5 million was spent on marketing and sales expenses. The disappointing quarter caused Deutsche Bank's, Alan Braverman and Timothy Weller at Donaldson Lufkin & Jenrette to downgrade their recommendations on the company. So be it. I will be the company's sole supporter. But that's how you make money on Wall Street. Always fight the herd. Conventional wisdom will get you nowhere. Verio's loss is not a major concern for me right now. The company will not post a profit this year or next because it is spending heavily on infrastructure and acquisitions (much like PSINet, which has tripled since I recommended that stock). But Verio will turn cash flow positive next year, which is what I am looking for. Plus, Verio is building on its original 15-year, $100 million contract with Qwest (NASDAQ: QWST). Qwest recently extended the term of Verio's minimum commitment under that agreement from 7 to 10 years and increased Verio's capacity commitment by $60 million over the extended commitment term. The extended contract and higher volume of service commitment provides Verio with an improved price beginning in January 1999. Bottom Line: The company recently completed a $400 million debt offering, so it has plenty of cash to keep it going while it expands its Web-hosting network. Verio is meeting a very basic need, the need for a home. And it is not just any old port in a storm. Verio provides a full-service home for the homeless. It's a simple business plan, the kind a simple guy like me can appreciate. Hey, stop laughing, I said simple guy, not simpleton.