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 presentation
Research
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
Service Providers
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
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
Analysis of 2000 presentation
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 Reorganization
Biggest 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.
Company studies
Check Point Software
eBAY
USInternetworking
COMPANY OVERVIEW
Check 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
What Checkpoint Does...
Provides Secure
Virtual Network
(SVN) for users to
help protect sensitive
information while
transferring over the
internet.
(SVN)
Writes and sells secure
programs and firewalls for
corporations
What Checkpoint Does...
As of October 2001, the company has more than
86,000 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
Is Checkpoint Making $ ?
 Yes...
 Anticipated 5% EPS growth in ‘02
 Anticipated 36% revenue growth in ‘02
Text Source: http://biz.yahoo.com/z/a/c/chkp.html
Chart Source: http://www.checkpoint.com/corporate/financial_info.html
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
Anticipated 57% EPS growth in ‘02
Anticipated 42% revenue growth in ‘02
Competitors (yahoo auctions,
amazon.com, direct marketing websites)
entering into the picture.
Solid growth trend that should follow
internet usage
Source: http://biz.yahoo.com/z/a/e/ebay.html
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
Source: http://biz.yahoo.com/z/a/c/usix.html
Quarterly Revenues
$40,000,000
$35,000,000
$30,000,000
$25,000,000
$20,000,000
$15,000,000
$10,000,000
$5,000,000
$0
Sep 30, 2000
Dec 31, 2000
Mar 31, 2001
Jun 30, 2001
($47,000,000)
($48,000,000)
($49,000,000)
($50,000,000)
($51,000,000)
($52,000,000)
Jun 30,
2001
Mar 31,
2001
($44,000,000)
($45,000,000)
($46,000,000)
Dec 31,
2000
($42,000,000)
($43,000,000)
Sep 30,
2000
Quarterly Net Income
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
Summary of companies
Checkpoint
profitable, growing
As online commerce increases, secure
transactions increase, revenues increase
eBay
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
NASDAQ IPOs per year
700
600
500
400
300
200
100
0
S1
1998
1999
2000
2001
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/
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
Source: http://www.icabot.com/stockpickingcriteria.html
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 stabilized
Fewer IPOs
VC funding scarce
Invest smart
Questions?