Internet Stocks
Group 5 Michael Clamors Michael Nixon
Corporate Disclaimer
Certain statements in this presentation are forward-looking statements. Because such statements deal with future events, they are subject to various risks and uncertainties and actual results could differ materially from the company's current expectations. Factors that could cause or contribute to such differences include, but are not limited to: the impact on the Company of economic and political uncertainties and weaknesses in various regions of the world; changes in the competitive landscape; a shift in demand for products such as ours; unknown factors affecting the third parties with which we have formed business alliances; timely availability and customer acceptance of our new and existing products, and other factors and risks
The authors assume no obligation to update information concerning its expectations.
Inputs
2000 presentationResearch
Financial magazines Financial websites Corporate websites
Interview Eric Houser
A.G. Edwards Stockbroker
What is an Internet Stock?
Company that utilizes the Internet as a vehicle for earning revenues
What we thought...
What we expected...
What actually happened...
What is an Internet Stock?
Three main categories Infrastructure Service providers Content providers
Infrastructure Providers
Provide the hardware that the internet relies on to operate
Earnings growth tied to growth in demand (usage) of the internet
Examples: Cisco, Lucent, Sun Microsystems, Check Point Software
Service Providers
Can provide internet service (ISPs), applications service (ASPs), or other services online.
Earnings generated by fees generated by usage, advertising, click-through
ASP examples: Interliant, USinternetworking
Top US ISPs by Subscribers Q3 2001 AOL (24%) MSN (6.3%) United Online (5.5%) Earthlink (4.4%) @Home (3.7%)
Source: ISP-planet.com/research/rankings/usa.html; Author: P. Fusco, Nov. 2, 2001
Service Providers
Content Providers
Provide information, entertainment, products through the internet
Earnings made by usage fees, advertising fees, click-throughs
Examples: Yahoo, Amazon.com
Analysis of 2000 presentation
Last year’s group forecasted: Consolidation of companies needed to
succeed and become profitable. Infrastructure players need to provide
services outside of the internet. Diversify so that they are not solely
dependent on the success of the internet. Their case studies: Amazon.com, Priceline,
Cisco
Amazon.com in the last year Diversified “Amazon Credit Account -- a virtual,
cardless credit “card” -- for use when shopping at Amazon.com”
Increased “stores”: magazines, CDs, auctions
Source: Amazon.com Press Release Nov. 2, 2001, Oct. 30, 2001; www.custom.marketwatch.com
Analysis of 2000 presentation
Priceline.com in the last year Consolidated PricelineMortgage Expanded relationship with Visa to
increase online security added long distance calling services added European hotel reservation services
Source: Oct. 29 2001 Company Press Release www.custom.marketwatch.com Oct. 16, 2001 Company Press Release www.custom.marketwatch.com
Analysis of 2000 presentation
Cisco in the last year:
Acquired 20 companies between ‘99 and ‘01
Operations ReorganizationBiggest structural change since 1997
Analysis of 2000 presentation
Was last year’s group findings correct? yes and no. The companies seem to have diversified
and changed. However, the majority are still not making money--still struggling to survive.
Analysis of 2000 presentation
Company studies
Check Point SoftwareeBAYUSInternetworking
COMPANY OVERVIEWCheck Point Software Technologies is the worldwide leader in securing the Internet. The company's Secure Virtual Network (SVN) architecture provides the infrastructure that enables secure and reliable Internet communications. SVN secures business-to-business (B2B) communications between networks, systems, applications and users across the Internet, Intranets and extranets.
-Source: www.checkpoint.com Nov. 4, 2001
Writes and sells secure programs and firewalls for corporations
Provides Secure Virtual Network (SVN) for users to help protect sensitive information while transferring over the internet.
What Checkpoint Does...
(SVN)
What Checkpoint Does...
As of October 2001, the company has more than86,000 registered customers with over 232,000 installations worldwide and 108,000 networks worldwide
Source: http://www.checkpoint.com/corporate/corporate.html
NASDAQ stock
Source: http://www.BigCharts.com
Yes...
Anticipated 5% EPS growth in ‘02 Anticipated 36% revenue growth in ‘02
Text Source: http://biz.yahoo.com/z/a/c/chkp.htmlChart Source: http://www.checkpoint.com/corporate/financial_info.html
Is Checkpoint Making $ ?
COMPANY OVERVIEW
eBay is the world's online marketplace(tm). Founded in 1995, eBay created a powerful platform for the sale of goods and services by a passionate community of individuals and businesses. On any given day, there are millions of items across thousands of categories for sale on eBay, as well as on Half.com, eBay's site dedicated to fixed price trading. eBay enables trade on a local, national and international basis with customized sites in markets around the world.
Source: www.ebay.com
Source: http://www.BigCharts.com
Source: http://biz.yahoo.com/z/a/e/ebay.html
Anticipated 57% EPS growth in ‘02Anticipated 42% revenue growth in
‘02Competitors (yahoo auctions,
amazon.com, direct marketing websites) entering into the picture.
Solid growth trend that should follow internet usage
COMPANY OVERVIEW leading Application Service Provider, USi takes full
responsibility for delivering the latest enterprise applications and e-commerce solutions as a secure, reliable, and scalable service to its Clients. Offered for a flat monthly fee, Usi’s iMAP Solutions seamlessly integrate the hardware and software, networking, security, and round-the-clock client care, and are backed up by the highest service level guarantees in the industry.
Source www.usi.net
• Strategic Partners
USi has established ground-breaking partnerships with market share leaders such as Ariba, Lawson, PeopleSoft, Siebel Systems, BroadVision, Plumtree, Microsoft, and Oracle. These relationships enable clients to obtain premier packaged software functionality without the burden of ownership as an integral component of an end-to-end outsourced business solution.
Source www.usi.net
Source: http://www.BigCharts.com
Quarterly Revenues
$0
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
$30,000,000
$35,000,000
$40,000,000
Sep 30, 2000 Dec 31, 2000 Mar 31, 2001 Jun 30, 2001
Quarterly Net Income
($52,000,000)
($51,000,000)
($50,000,000)
($49,000,000)
($48,000,000)
($47,000,000)
($46,000,000)
($45,000,000)
($44,000,000)
($43,000,000)
($42,000,000)
Se
p 3
0,
20
00
De
c 3
1,
20
00
Ma
r 3
1,
20
01
Ju
n 3
0,
20
01
Source: http://biz.yahoo.com/z/a/c/usix.html
Anticipated loss of $1.18 per share in ‘02 (5% growth)
Does not appear to be turning profit in the next 2-3 years
Stock price reflects this, shedding 99.7% of its value over the last 18 months
Source: http://biz.yahoo.com/z/a/c/usix.html
Summary of companies
Checkpoint profitable, growing As online commerce increases, secure
transactions increase, revenues increaseeBay
history of profitability strong growth forecasts (tied to growth
of internet and online commerce)
Summary of companies
USInternetworking Not profitable Stock price weak Losses mounting Future uncertain?
Investing in Internet Stocks
Do you feel lucky?
Investing in Internet Stocks
Looking for a way to commemorate the great dotcom disasters? Head over to eBay, where more than a few burned investors are trying to recoup some of their losses by selling the canceled stock certificates of an assortment of defunct dotcoms like eToys and Pets .com. Though some certificates have reportedly gone for more than $500, even this market appears to be crashing, with prices topping
out at $200 or less.
Source: David Futrelle; Money, New York; Oct 2001; Vol. 30, Iss. 10; pg. 160
Technology IPOs Source: www.nasdaqnews.com
1998 1999 2000 2001
S10
100
200
300
400
500
600
700
NASDAQ IPOs per year
Internet Stock Index (ISDEX)
Index made of 50 stocks representing $396 billion in market capitalization
Only 9 profitable companies! AOL, Check Pt, eBay, Hotel Reservations
Ntwk, Internet Sec. Sys., Juniper, Netegrity, RSA, Ulticom
Source: Wall Street Research Net
http://www.wsrn.com/apps/ISDEX/
ISDEX Chart 3 year
Source: Wall Street Research Net
http://www.wsrn.com/apps/ISDEX/
ISDEX Chart 6 month
Source: Wall Street Research Net
http://www.wsrn.com/apps/ISDEX/
Source: http://www.icabot.com/stockpickingcriteria.html
How to select internet stocks
Five criteria for selecting internet stocks company with a major portion of business
comes from the growth of the internet company provides a unique product with a
major benefit to customers company serves a huge mass market management has the confidence of investors stock has strong positive momentum
Investing in Internet Stocks
...internet stocks have a lot to prove. They need to consistently make money before they can be considered anything other than a gamble. There are a few viable internet companies out there, such as EBAY. However, the fact that a company is internet related is not a reason in and of itself to invest in the stock. If the company has a viable business strategy that happens to utilize the internet, then so be it. Source-A.G. Edwards Stock Broker
What is the future of internet stocks?
A lot more bankruptcies and a fair amount of consolidation. The decent companies will be bought (probably by well established brick and mortar companies with excess cash) and the good ones will survive. All the others will go the way of the dinosaur. Source: A.G. Edwards Stockbroker
Conclusions
Companies have stabilizedFewer IPOsVC funding scarceInvest smart
Questions?