Internet Stocks zGroup 5 yMichael Clamors yMichael Nixon

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


http://www.amazon.com/exec/obidos/subst/home/all-stores.html/ref%3Dtab_gw_storesdirectory/002-7239138-0316027

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


http://www.priceline.com/

Cisco in the last year:

Acquired 20 companies between ‘99 and ‘01

Operations ReorganizationBiggest structural change since 1997


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 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

http://www.ebay.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


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)

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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?


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



ISDEX Chart 6 month



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


...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?

Documents

Internet Stocks zGroup 5 yMichael Clamors yMichael Nixon