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To: Shafik Habal who wrote (21796)	5/18/1999 6:47:00 PM
From: Shafik Habal	Respond to of 27307

Get online or get out, warns Merrill Lynch Reuters Story - May 18, 1999 16:56 By Kirstin Ridley LONDON, May 18 (Reuters) - It pays to click with IT. Investment bank Merrill Lynch said on Tuesday that electronic commerce, or e-commerce, was not only virtually here -- it had arrived. And companies ignored it at their peril. Some industry experts have been sceptical of widespread urgings to get on the Internet, warning that selling to consumers is unlikely to produce a profit for many years, if ever, although business-to-business dealings may have a chance. But in a 150-page special report, Merrill insisted that e-commerce was altering ways of doing business in a string of industries from banking to telecommunications. Only those with market size, market share a profitable package would survive. "We view the growth of the Internet and e-commerce as a global mega-trend, along the lines of the printing press, the telephone, the computer and electricity," said Henry Blodget, Merrill Lynch's New York-based Internet analyst. "We believe it will affect dozens of industry sectors in the world economy over the next decade." Consensus estimates predict that the value of retail sales over the Internet will skyrocket to between $35 billion and $75 billion in the U.S. by 2002, compared to about $8.0 billion in 1998, when total retail sales were $2.7 trillion. Companies in information-based industries such as banking, brokerages and publishing are already facing the threat of a new genre of rivals on the Internet as users bank, trade and buy books at near cost price from the comfort of their homes. Other industries, such as freight forwarding and insurance, are re-defining themselves while real estate faces the chill wind of e-commerce's influence as the Net "cannibalises" sales, threatening the underlying value of retail real estate, Merrill says. Retail real estate analyst Craig Schmidt told a London investor briefing that there were those who wanted to blow up the Internet -- but didn't know where it was. Part of its threat lies with the valuations the market places on companies that deal in cyberspace. Merrill said new Internet companies were escaping any penalty in the stock market for the losses they incur in building their e-commerce business. High valuations give them an unusually low cost of capital, allowing them to dip frequently into the market to get inexpensive funds to invest faster in new portals, technologies or ventures. Internet gaint Amazon.com , which was born some five years ago, is now one of the world's largest booksellers. It clocked up a $125 million pre-tax loss last year but has a market capitalisation of around 18 billion pounds ($29 billion). There are few commonly accepted truths. One could be that size matters, because the incremental cost of the incremental transaction is negligible, so companies try and sell as many products as possible to customers. Another might be that while the Internet is borderless and eliminates natural barriers to entry in foreign markets -- such as high cost of retail space in London or extra security in Moscow -- the product will still come in a truck, so there is a need for the infrastructure to deliver it. In the meantime, very few Internet companies are making money and most pundits admit they have no idea what the long term ramifications of the Internet will be. "The world is going to change in ways in which we cannot even comprehend right now," said Jeff Kaufmann, trucking analyst at Merrill Lynch. "The real truth is not what you see, it's what you don't see."($1=.6164 Pound)