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To: jason who wrote (52)	6/4/1999 7:39:00 PM
From: William F. Wager, Jr.	Respond to of 1956

DJ IPO Outlook: Non-Sexy Net Deals Surviving Aftermarket By Dunstan Prial NEW YORK (Dow Jones)--As the dust settles over the landscape for new Internet-related offerings, it's worth noting that investors are apparently savvier than many had thought. The prevailing myth surrounding the recent frenzy for Internet IPOs holds that unsophisticated investors have arbitrarily pushed the values of new super-hyped Web stocks to absurd valuations. For the most part, however, the IPOs that have shown staying power this year haven't been the high-profile deals from sexy content providers whose brands are household names among the online crowd. Instead, the big aftermarket winners have emerged from the more mundane Internet infrastructure sector. Indeed, seven of this year's current top ten IPO performers are considered infrastructure companies. Analysts say the novice investor theory is valid, but only to a point. First-day gains of 200% and 300% certainly became commonplace due to enthusiastic momentum trading on the part of retail investors. But most of those first-day phenomena have faded. Consider the aftermarket performances of well-known content providers iVillage Inc. (IVIL), iTurf Inc. (TURF), and TheStreet.com Inc. (TSCM) All three stocks tripled in value in their debut sessions but have since lost at least half of those gains. And iTurf, a New York-based Web site for teen-agers, is now consistently trading below its offering price of $22 a share. It changed hands recently at 18 1/2. Now consider the infrastructure companies. The seven new issues currently entrenched in the top 10 performers list for 1999 have gained an average of about 350% from their offering prices. "A lot of people are leery of service and content vendors," said Robert Herwick, president of Herwick Capital Management. "How many car-selling sites do we really need out there?" By contrast, he said, the Internet infrastructure category consists of "very real companies with very real technologies that have already proven an ability to execute" a business plan. The top performing newly public infrastructure companies are: software makers Healtheon Corp. (HLTH), Portal Software Inc. (PRSF) Bottomline Technologies Inc. (EPAY) and Brocade Communications Systems Inc. (BRCD); high-speed Internet access companies Redback Networks Inc. (RBAK) and Copper Mountain Networks Inc. (CMTN); and Latin American portal company StarMedia Network Inc. (STRM). Internet infrastructure companies have been able to sustain their aftermarket gains because institutional investors view the stocks as long-term investments, according to Herwick. "Investors are looking for companies with high market share, high barriers to entry and high growth potential," he said. "These companies are interesting because they span the entire scope of the net, rather than having to niche themselves into a defensible position." With few barriers to entry, content and services providers will either have to tighten their focus to a reach a niche audience, or face almost unlimited competition, Herwick said. Furthermore, in order to overcome these hurdles, cash-hungry start-up content and service providers are forced to spend exorbitantly on advertising and marketing to build brand name recognition. Institutional Investors Turning To Net Infrastructure Infrastructure stocks have emerged as a favorite selection of the 18-month-old Renaissance IPO Fund, a publicly traded mutual fund that invests exclusively in new issues, said co-manager Kathy Smith. Some recent picks include WorldGate Communications Inc. (WGAT), which is developing a system to deliver the Internet over cable-television systems; Equant N.V. (ENT), which operates the largest data network in Europe; and two high-speed Internet access companies - Covad Communications Group Inc. (COVD) and PairGain Technologies Inc. (PAIR). Juniper Networks Inc. and CopperCom Inc. have been cited by analysts as two of the more high-profile infrastructure companies either planning or rumored to be pursuing IPOs. Juniper Networks, which filed with the Securities and Exchange Commission in April for an IPO, makes "next-generation Internet backbone routers" that enable online networks to improve speed and efficiency, according to the company's filing. The preliminary prospectus didn't include the number of shares to be offered and their estimated price range. Goldman Sachs & Co. is lead underwriter. CopperCom, which hasn't filed for an IPO but is rumored to be considering one, makes products for digital subscriber line, or DSL, networks, which provide high-speed access to the Internet over existing copper phone lines. Investors include Intel Corp. (INTC) and technology-oriented investment bank Hambrecht & Quist Inc. CopperCom President and CEO Cynthia Ringo said the company was at least a year away from an IPO, although "the environment at present is hospitable to (Internet network) equipment vendors." Abhi Chaki, an analyst with Jupiter Communications in New York, said high-speed access companies should continue to attract investors. "Anything that will help speed up broadband deployment is resonating," he said. DSL technology is expected to compete with cable modem systems for high-speed access customers, Chaki said. But the two can co-exist. DSL technologies will probably dominate the business market because business customers are willing to pay more for higher quality. Cable modem systems will dominate the consumer market, Chaki said, because the systems are slower but cheaper. Rock on Jason, --Bill