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Internet Security & Identity Authentication Issue
Four analysts and top management from nine sector firms examine the Security/Internet Security & Identity Authentication sector in this 51 - page Issue from The Wall Street Transcript.
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U.S. Bancorp Piper Jaffray's Analyst considers internet.com a profitable company Full article published: 11/23/2000     SAFA RASHTCHY is a Vice President and Senior Research Analyst at U.S. Bancorp Piper Jaffray


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TWST: Safa, are there any media businesses that could be characterized as “naturals” for the Internet, or do you believe that all areas of media can successfully migrate to the Web?

Mr. Rashtchy: I don’t think all of them can successfully migrate. I think the Internet should be seen as one additional channel for media, just as we have broadcast, print and other methods of delivering content and entertainment. As to which areas fit the Internet bets, I believe that more specialized or niche areas will benefit most from being online as they can best leverage the Internet’s areas of strength, that is, targetability, personalized services, global reach, and immediacy. These features can increase the profitability of a niche publication significantly. For example, let’s say that you are developing a magazine for a special type of horseback riding. Not only is your ability to reach a much bigger audience on the Internet significantly improved and your costs less than those of traditional methods, but you can generate more revenues from this audience from both advertising and from selling other, highly targeted items to them. So I would say the more specialized magazines actually have a better way of leveraging the Internet.

TWST: Safa, which stocks, in your opinion, are the most compelling buys today?

Mr. Rashtchy: Well, I would point to two of our media stocks. One that has been mentioned is Yahoo! (Nasdaq:YHOO), which is still at a very high multiple in terms of valuation. At the other end of the scale I would point to internet.com (Nasdaq:INTM) and, like Yahoo!, this is a profitable company. Internet.com has a focused media network for Internet professionals. It has the type of highly targeted and influential audience that makes a media company very attractive for advertisers –- in this case B2B advertisers like IBM (NYSE:IBM), HP (NYSE:HP), Oracle (Nasdaq:ORCL), and others. Basically, internet.com is a collection of more than 100 Web sites that provide various content, reviews and services for business professionals who work in and around the Internet. As we were talking earlier about consolidation to bring in scale, I think internet.com has shown how you can get scale by linking and cross-promoting different Web sites. Using this network effect, the company has been able to reduce its traffic cost significantly. So I would point out those two as promising companies to keep an eye on.

TWST: And the risks at this point, Safa?

Mr. Rashtchy: Well, the risk for Yahoo! is just the reverse of the opportunity: developing non-advertising revenues. For internet.com I would say that really the biggest risk is just execution at this point. Market growth for them is basically on auto pilot since as long as the Internet is growing, their market is growing. The company is continuing to deliver more content and is both broadening and deepening its reach, while the advertising base doesn’t seem to have the same risk level as the B2C media sites. So I would say there is much less risk in this stock compared to other online media companies.

Tickers included in this excerpt: INTM

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This interview is a small excerpt from a comprehensive and in-depth Roundtable discussion of Online Media Issue featuring other analysts and published in The Wall Street Transcript on 11/20/00. For more information call (212) 952 7400. The Wall Street Transcript does not endorse any of the comments made by interviewees, and does not make stock recommendations.

Copyright 2000, Wall Street Transcript Corp.

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  • Internet, Software & Services
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