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To: Sarmad Y. Hermiz who wrote (46869)	3/23/1999 2:41:00 PM
From: Glenn D. Rudolph	Respond to of 164684

9 investment. As well, we'd argue vehemently that DoubleClick's competitive position (certainly with the Network business but increasingly with the DART business) has grown stronger every day and now that we believe has reached a real inflection point (of no return?), we'd argue for a lower discount rate and thus a higher valuation (all other things being equal). Our target of $200 places a $3.4 billion valuation on DCLK, which we get to via a revenue multiple (15Xs 2000 compared to the Internet universe mean of 18Xs) and a discounted earnings approach (125Xs the NPV of 2002's $2.50 EPS estimate compared to the Internet universe mean of 165Xs forward EPS). We admit that this is more art than science, but on a relative basis, we find DoubleClick cheap against its opportunity and competitive position. Yup…The Price Target Is Aggressive For fun late last night we went back over a model of DCLK that we kept from January 1998. Our thinking at that time was that at the end of 1998 DCLK would report about $50 million in revenue. Well, history now shows DCLK's 1998 revenue came in at $80 million, 60% higher than what we (and the company, we may add) thought was aggressive then. Now we're not saying that our 2000 revenue estimate will prove to be equally conservative, but our gut tells us that the revenue and earnings upside remains too big to quantify with any precision, and our recall from the cold days of early 1998 adds weight to that feeling. We'd also add that our bets in the Internet space over the last few years have tended to coalesce around those established leaders whose markets were big, whose management teams were aggressive and smart, and whose business model made the most sense. On all three counts, DoubleClick is exceeding our early optimistic expectations. What?! Upgrade Into A $40 Move In The Last 6 Trading Days? We know we're taking a risk upgrading at this particular moment, since any number of hobgoblins could cause a nice retraction in this stock sooner rather than later: quiet period skittishness, unusual arbitrage-inspired trading (from the recent $200 million convert offering), profit taking (DCLK was at $87 March 1 st ), or simply that the March quarter results won't meet “whisper” number expectations (and who can tell what those are?). But you pay us to take risks and, besides, we hesitated to upgrade DCLK when the Alta-Vista overhang was resolved in January, and we've paid for it. As we said on January 21st: “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.” We don't want to learn this hesitation lesson twice, so we won't get cute by trying to time a trading call today (though we sure wish the stock wasn't up $15 yesterday). We're upgrading based on a more fundamental business momentum call, so if (when?) the stock comes back after such an aggressive move, we'd be all over it attempting to round out a position in one of the best plays on Internet advertising out there. Why We're Making DoubleClick A Core Internet Holding We chewed on this upgrade for some time, not because we thought DCLK wouldn't do well as a stock, but rather because of the austere company DCLK now finds themselves in within our