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Jw,
I was talking with a friend who is a CTO, Chief Technical Officer, of a
small company that supplies some hardware and software to the internet
food chain. What is driving the push on all this netstuff, aside from
etailing is the connection.
The example he gave: his church has 340,000 parishes in the US, his
particular church just spent between $20-$50K in connnectivity, while
roughly only 5 to 7% of these churchs have an online presence. The
website for this church take up 6 gigs of storage in some netfarm.
So while etailing might be thin, and the model not quite right, the real
gold rush today is in fabricating the connection and connecting points.
His key fear was that someone would figure out that this expansion would
only bring about 1/2 of current expectation and publize such an
expectation. This would crash'em abit in his opinion. On the other
hand, his opinion was that
analyst's wouldn't do such a thing owing to their vested interest in the
continued expansion.
An interesting view of these tech people is that concerning thier money,
the stock market is the only place to be.
1.Its too expensive to cash out.
2.Interest rates don't give a return commensurate with what can
be made in stock.
The second comment I found interesting, mind you a casual conversation,
but he didn't voice concern about the Fed's increasing of rates.
So while the etails might be dumping, there exists a second wave in this
net business, where a new set of technologys is entering the business,
take a look at the B to B look at EXDS.. on 2-15 the stock was trading
about 115-20 this morning its starting to tag 170.
FWIW,
Don Thompson
JW wrote:
>
> FYI. The beginning of the end for net stocks?
>
> JW
>
> --------------
> http://www.investorguide.com/investingnews.html?content=http://www.mercu
> rycenter.com/svtech/news/breaking/merc/docs/071675.htm
>
> Posted at 10:00 a.m. PST Thursday, March 2, 2000
>
> Internet retailers face tough times
>
> PALO ALTO, Calif. (Reuters) - It was barely a year ago that investors
> could not get enough of Internet retail stocks, and new online stores
> that mimicked Amazon.com were appearing on a daily basis.
>
> While few people expected that level of euphoria to last, the industry
> is, nonetheless, alarmed by how swiftly and severely fortunes have
> reversed.
>
> "E-tailing" has become something of a dirty word among even the most
> enthusiastic Internet investors, with many venture capitalists say they
> will back anything but an Internet store.
>
> Most of the e-tailing stocks that have recently gone public -- like
> Pets.com Inc., Buy.com Inc. and VarsityBooks Inc. -- are trading near or
> below their IPO prices. Shares of the online pet supply store Pets.com,
> for instance, hover around $7 a share -- more than 30 percent below the
> $11 a share where it debuted less than a month ago.
>
> Even more stunning is that some of the e-tailing pioneers -- including
> Drugstore.com Inc., eToys Inc. and the software store Beyond.com
> Corp. -- are trading at a fraction of their highs for the year. Some are
> running out of cash and retooling to focus less on retailing, which
> increasingly is seen as a questionable business.
>
> For all the double-digit, single-day gains that initially made these
> Internet retailing stocks famous, it seems that their subsequent drops
> to the downside were almost as large.
>
> Abhishek Gami, an analyst with William Blair in Chicago, says the 48
> e-commerce stocks his firm tracks have risen an average of just 7.8
> percent since June of 1996.
>
> "They've way underperformed the overall market," he says.
>
> Bob Walberg, with Briefing.com in Chicago, says "investors are finally
> beginning to question these business models."
>
> Analysts are hard-pressed to find a single pure-play online retailer has
> turned a profit to date.
>
> While the famously unprofitable Amazon.com continues to win some support
> for its strategy of delaying profits in order to build its operation,
> investors are not so willing to make this leap of faith for lesser
> online retailers that do not have nearly the customer base or brand
> recognition of Amazon.
>
> The question now being posed to most e-tailers is not when, but if, they
> will ever make money.
>
> How did a business that seemed to define the booming tech-driven
> economy, find itself in so much trouble?
>
> Many critics now say there was a gross miscalculation built into the
> assumption that retailers could slash overhead costs merely by doing
> away with the lumbering ``brick-and-mortar'' stores and setting up
> virtual shops online.
>
> "There are a lot of parts you need to build before you can make money
> online," Gami notes. "Amazon is spending billions of dollars to build
> out its distribution facilities".
>
> "I still think (Internet retailing) will be huge ... but the key point
> is that you really don't make a lot more online than offline. E-tailers
> don't have stores, but they still have to build warehouses and
> infrastructure, and they still have to hire people to deal with
> returns."
>
> Not all e-tailers think their expenses will rise as high as they are for
> their offline counterparts, but most now admit there are costs that were
> overlooked initially. In an industry packed with like-sounding
> businesses, hefty spending on advertising has been imperative to
> building a strong brand.
>
> Even Amazon found it needed to increase advertising spending beyond what
> was planned for the last holiday season to spread the word that it was
> no longer just a book retailer. And many smaller online merchants spent
> upwards of $3 million for a 30-second slot during the Super Bowl in
> January.
>
> If these companies thought they could build a brand with a few
> well-placed ads, it now appears aggressive marketing will have to be a
> big part of their business plans going forward. Aside from Amazon, there
> are not many strong e-tail brands, industry analysts agree -- except for
> the online auction site eBay Inc. and Priceline.com Inc., which lets
> consumers set their prices for a range of goods from airline tickets to
> gasoline.
>
> Most consumers still do not know the difference between a Cyberian
> Outpost and a CyberStores.com, or Pets.com and Petstore.com. So now, on
> top of exorbitant ad spending, many of these stores are trying to
> attract customers by slashing margins to razor thin or nonexistent
> levels.
>
> In the midst of so much confusion, one thing that appears to be certain,
> is the continued growth in overall e-tailing sales. Forrester Research
> projects online retail sales will grow to $184.5 billion in 2004 from
> $20.3 billion in 1999.
>
> Yet some retailers appear less willing to bet on even a modest slice of
> that pie. Online drug store PlanetRx.com Inc , for example, recently
> said it expected to derive 15 percent of its future annual revenues from
> corporate sponsorships, often with drug companies that will sponsor
> disease-specific areas on the site.
>
> Newly public VarsityBooks, which last year was touting the profit
> potential of selling text books to college students, now says it is
> supplementing that business with other, non-retail, revenue streams. The
> plan is to use its on-campus presence to do direct marketing for other
> businesses.
>
> "In contrast to e-tailing," direct marketing "has a significantly higher
> profit margin, which is an important element of our strategy going
> forward," says VarsityBooks Vice President Jonathan Kaplan.
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