Go2Net poised to benefit from dot-com shakeout

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http://www.zdii.com/industry_list.asp?mode=news&doc_id=ZE503883

> April 18, 2000 7:35am
>                      
> THE DAY AHEAD: Go2Net poised to
> benefit from the dot-com shakeout
>
> By Larry Dignan ZDII
>
>
> As the dot-com shakeout continues, few companies can afford to be
> as opportunistic as Go2Net (Nasdaq: GNET). And Go2Net execs
> intend to take full advantage of the dot-com malaise to grow the
> company's network.
>
> Cash is king and Go2Net has a lot of it. Go2Net also has profits,
> which is already distancing the company from the dot-com pack.
> The Internet portal has posted a profit in each of the last five
> quarters. Only Web titans Yahoo! Inc. (Nasdaq: YHOO) and America
> Online (NYSE: AOL) can say that.
>
>
> Go2Net's latest quarter was stellar. The company reported a
> fiscal second quarter profit of 18 cents a share, excluding
> charges. Wall Street was expecting earnings of 11 cents a share.
> Sales were up 34 percent sequentially to $18.7 million. To put
> the quarter in perspective, consider that Go2Net didn't have any
> acquisitions this quarter. The strong sales growth was all
> organic.
>
> Go2Net is also scaling its business well. Officials upped
> operating margin targets to 33 percent to 38 percent from a
> previous target of 30 percent. The company also has a diversified
> revenue base with e-commerce, subscription, advertising and
> licensing revenue. By the end of the year, Go2Net will drive half
> of its sales from e-commerce, subscriptions and licensing.
>
> Although officials continued to preach the virtues of profit, the
> real action will be on the merger and acquisition front.
>
> The dot-com shakeout has left Go2Net in a great position. Private
> firms, which will have a tough time getting funding, are looking
> to buyouts as an exit strategy. Public companies have had their
> shares decimated. Go2Net, with its $285 million in cash and cash
> equivalents, is ready to go bargain hunting.
>
> In an interview with ZDII, Go2Net CEO Russell Horowitz said the
> company would step up its acquisition pace and buy complimentary
> companies and technologies to benefit its network. Go2Net will
> also acquire technologies for its platform via minority
> investments.
>
> "We're in a strong position to acquire key pieces for the
> network," said Horowitz. The reason for the strength is clear --
> Go2Net has plenty of cash from its partnership with Paul Allen's
> Vulcan Ventures and a decent stock currency.
>
> Horowitz said acquisitions will be used to consolidate some of
> its key verticals and gain technology that can be licensed.
> Bargains are everywhere. "A number of companies went public and
> probably shouldn't have," said Horowitz. "We're also seeing more
> private companies being acquired."
>
> "The volume of calls is higher than usual," said Horowitz.
> "There's an increasing receptiveness by private companies to be
> acquired. The market is looking for substance and strong market
> position."
>
> Preaching profits
>
> Horowitz and company pulled off a rare coup for dot-com firms.
> They said "profits" or some derivative of it at least two dozen
> times on the analyst conference call.
>
> "We're big believers that Internet companies would be valued
> based on a P/E multiple, growth rates and defensible market,"
> said Horowitz. "The Wall Street standard is being raised."
>
> What's amusing about Horowitz's sermon is that it is finally on
> target. Go2Net was reporting profits even as its dot-com peers
> laughed off the company's strategy.  The conventional wisdom went
> like this: Why post a profit when you can invest heavily now and
> investors look the other way?
>
> Now we see Go2Net was on target. As for the outlook, Horowitz
> said its current quarter is off to a strong start and has the
> same trend of the second quarter.  Translation: Another strong
> quarter.
>
> And if yesterday's trading was indicator, Go2Net is viewed as one
> of the Net's blue-chip companies. Only the strong ran up on
> Monday. Go2Net surged 15 percent, but peers About.com (Nasdaq:
> BOUT), Ask Jeeves (Nasdaq: ASKJ), Go.com (NYSE: GO), Goto.com
> (Nasdaq: GOTO), Looksmart (Nasdaq: LOOK) and NBCI (Nasdaq: NBCI)
> remained mired in a slump. Lycos (Nasdaq: LCOS) and Excite@Home
> (Nasdaq: ATHM) also slipped Monday.
>
> But Wall Street still doesn't notice Go2Net
>
> What does a high-profile partnership with Paul Allen, plans to
> roll-out a broadband portal this summer, and sustainable
> sequential sales growth of 15 percent to 20 percent get Go2Net?
>
> Just about everything but Wall Street attention.
>
> We've pointed this out before, but it bears repeating.  The big
> brokerage houses -- Goldman Sachs, Morgan Stanley, Chase H&Q and
> Robertson Stephens -- still refuse to cover Go2Net because the
> company hasn't sent any underwriting work their way.
>
> As the dot-com shakeout continues, it only makes these brokerages
> -- and their analysts -- look worse.  How many profitable
> quarters can these guys ignore?

I bought GNET just over a year ago... hasn't done much since then.
(it doubled soon after I bought it, but dropped a lot recently.)

--
Gerald Oskoboiny <gerald@impressive.net>
http://impressive.net/people/gerald/

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