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Technology Stocks : USWeb (USWB) -- Ignore unavailable to you. Want to Upgrade?

To: Brett Behm who wrote (888)	5/14/1999 5:23:00 PM
From: Rick	Read Replies (1) \| Respond to of 1188

Brett - The reason 3% is bad is because there are alternative investments which are much less risky that generate much higher returns. If you can take less risk and generate a better return it makes sense. Take a look at the 30 year bond or if you want something with 5% dividends and capital appreciation potential look at Phillip Morris. Clearly if USWB is able to grow organically the stable of programmers, these multiples could come down significantly. But it is a very competitive industry - everybody is chasing talent (including potential USWB customers !) and you have to pay up for it. As long as you have to pay up for your raw materials, it is very difficult to get great margins. This is just not a great market situation for renting technical labor, as it is too competitive to raise prices greatly. Basically, you're not going to get much more than $200,000 per year on your rented labor. Regarding YHOO, CSCO, MSFT, and AOL: Completely different business models. None of these are consulting companies which rent technical labor to customers. Each of these companies has products. I don't have time at the moment to delve into each companies business model, but suffice it to say that they bear little resemblance to the model of renting consultants. The easiest way to understand this is the following statement: Each additional copy of Windows sold goes directly to the bottom line once you pass your breakeven point - it's pure gravy and it's a very powerful way to make money. Each consultant carries a salary with it each time it is sold to a client. It's not that you can't make a margin, you can, but it is nowhere near as powerful a way to make money. Additionally, with respect to Windows, it is a unique product (in fact it is a monopoly). It's not like the PC manufacturers can go anywhere else for the product. Please let me know when US Web acheives a monopoly on people that know how to build web sites, and I will place my entire IRA in it. Until that happens, please refrain from comparing USWB to MSFT as it betrays a fundamental misunderstanding about the respective business models - they really are not comparable. Just because a company has an internet related business does not mean it has the same potential to earn money on it's business model. rick.