June 1999 Contents
WALL STREET LIKES THESTREET.COM This year's list of successful Net IPOs will now include Alley-based TheStreet.com. Priced at $19 per share, the financial news site's stock hit a high of $73 per share before closing at $60, up 215 percent. TheStreet.com's offering of 5.5 million shares of common stock, or 23 percent of the company, raised over $104 million in before-cost proceeds. Underwriters for the IPO were Goldman Sachs, Hambrecht & Quist, and Thomas Weisel Partners. CBS MarketWatch, one of TheStreet.com's main competitors, had a stunning debut in January, raising $46.75 million and seeing its stock close up over 400 percent on its first day of trading. After hitting a high of $129 per share, MarketWatch has recently settled in the $60 to $70 range, closing at $65. For the quarter ended March 31, TheStreet.com had $1.1 million in advertising revenues and $713,000 in subscription revenue; $154,000 in other revenue came from hosting and new syndication arrangements with online and print media companies. Net loss for the same period totaled $7.1 million. As of March 31, 1999, TheStreet.com claims to have over 51,000 subscribers .The day before TheStreet.com filed with the SEC in February, it received a $15 million investment from the New York Times, giving the venerable old media company a minor equity stake. Since then, TheStreet.com has agreed to have its headlines indexed on the business section of the New York Times website, license its investment tools to the New York Times, and create a jointly owned newsroom for business news. Rupert Murdoch's News America has a small stake in TheStreet.com as well, having purchased $7.5 million in common stock at the IPO price of $19 per share. In exchange, TheStreet.com agreed this month to advertise on News America's media properties and its affiliates. TheStreet.com and Fox News Network will also co-produce a television show for the Fox News Channel that will feature TheStreet.com's brand name, editorial staff and outside contributors. PREDICT IT! Mergers Its Way Into The Public Market . . . At a time when Internet companies pondering an entry into the public markets are thinking long and hard about whether to take the plunge, Silicon Alley transplant Predict It! has entered through the back door. Earlier this month, the user-generated content firm formerly known as SportsCappers completed a reverse merger with a publicly traded shell company, giving Predict It! access to the public markets without its having to wait in line and go through the cumbersome IPO process. The deal also involved a new investment for Predict It! enough to keep the five-employee concern going for the next year to 18 months. Going public, and the hiring of former Site Specific COO and CFO Andy Merkatz as president, is part of the plan for expanding Predict It! beyond the small sports touting site it's been since launching in September of 1997. The site had its origins in founder Tom Courts' observation that a lot of sports-related discussion on the Internet centered on people's boasts about how great they were at picking winners. The Aspen, Colorado, resident's search for an objective way to measure people's accuracy started with his entering things by hand into an Excel spreadsheet. Eventually, the venture became an Internet-based business called SportsCappers, which moved to New York after Bob Lessin's Dawntreader LP venture fund sunk in an undisclosed amount of dough. Originally, the business model involved letting people make pick for free, but anyone who wanted a peek at other users' future picks paid $3. As an incentive, the picker got $1 of that. The pay-for-peek model appealed to gamblers, but apparently there weren't enough of them to keep things going. Now Predict It! relies solely on advertising revenues. It continues to pay pickers, but they only get $0.01 each time someone new looks at the future picks. Other dramatic changes are ahead for the company. Predict It! plans to add community features, and by mid-summer will launch a finance product which will allow users to show off and compare their stock-picking skills. Offerings in the entertainment, politics, and weather arenas are planned. Advertising, marketing, and distribution deals are also big priorities, as is the possibility of acquisitions. Tech Data, GE Capital Unveil $2B Deal In the largest deal in its 25-year history, Tech Data Corp. announced a strategic outsourcing agreement with GE Capital IT Solutions. Under the agreement, Tech Data will perform all IT procurement, configuration/assembly and logistics services for GE's systems integration company. The three-year arrangement covers procurement in the U.S. market and is expected to add $2 billion in annual incremental revenue to Tech Data's top line. Such deals are becoming popular for resellers and vendors alike. Throughout the industry, strategic partnerships are being formed and relationships consolidated to achieve increased efficiencies in the two-tiered model. Vendors including Apple Computer Inc., Seagate Technology Inc. and most recently, Compaq Computer Corp., with its Distribution Alliance Partner program, have been reducing the number of distributors they partner with on a direct-selling basis, and indirectly influencing resellers such as GE to outsource procurement practices. Larger resellers such as EDS Corp. and MicroAge Inc. have already outsourced their inventory functions to Pinacor to cut overhead and inefficiencies. In fact, Pinacor received 10 proposals for similar arrangements from other integrators in the last quarter alone. As for Tech Data, president and COO Tony Ibarg says the GE deal is likely to persuade resellers to consider similar measures. Ibarg says 40 percent of Tech Data's orders are drop-shipped directly to a reseller's end user, an indication that resellers are indeed outsourcing inventory and configuration functions on a regular basis. Besides Tech Data, GE considered one other distributor for the job: Ingram Micro Inc. GE's own distribution entities, Access Graphics Inc., Comstor Corp. and Integration Alliance Inc., were not in the running because the product mix they had to offer was not a fit for GE's needs. Under the new agreement, Tech Data will assume control of GE's 200,000-square-foot facility in Frederick, Md. With the Compaq deal and GE pact, Tech Data has revised sales estimates for its fiscal year from $16 billion to $16.5 to $17 billion. NT Serves Up Improved Features Sales of NT-based servers are booming, as customers start leveraging the platform to make the most of their corporate budgets. And as these servers move into more mission-critical and business-critical applications, users and resellers are focusing more on finding products that offer functionality and features usually found only in high-end mainframe server solutions. Advances in multiprocessing and memory technologies make NT a good fit for solutions that had once been the sole realm of Unix servers. Server vendors report they are focusing on adding any number of reliability features that can increase uptime substantially a primary concern for midsize and large business customers. Many improvements have come from the integration of "mainframe server" features into traditional NT servers. For example, support for server clustering has become a de facto expectation from VARs and their customers. Although still prohibitively expensive for most small customers, midsize and large customers are already integrating clustered solutions. Users are also looking for high-availability features that will ensure the reliability of those mission-critical servers. Such features may include hot-pluggable PCI cards, redundant fans and power supplies, and improved memory technologies. Many server vendors are also bundling with their hardware software applications that perform predictive management, which alerts the customer or reseller handling system support of impending problems. And, as always, the ability to manage servers remotely is becoming a given. Finally, the move to more robust applications is increasing the popularity of servers that integrate multiple processors. The introduction of Pentium III processors, which support four-way and eight-way configurations, is fueling customers' attempts to look at consolidating their server farms into fewer servers to reduce total cost of ownership and support costs. Bell Atlantic To Oppose AT&T, MediaOne Deal Bell Atlantic Corp. will use its formidable lobbying weight to try to block AT&T Corp's purchase of MediaOne Group Inc., opposing a part of the long-distance titan's strategy to compete head on with the local telephone powerhouse in the U.S. Northeast. Ivan Seidenberg, chairman of New York-based Bell Atlantic, Monday said federal regulators ought to block the $58 billion deal because it would give AT&T too much power over monopoly cable lines that reach 60 percent of American homes. AT&T's first foray into cable, purchasing No. 2 cable operator Tele-Communications Inc. for $48 billion, faced little outright opposition and was approved in less than a year. But growing unease about the planned takeover of No. 3 cable operator MediaOne could make it more difficult to the have latest deal approved. Seidenberg pointed to AT&T's earlier acquisitions of TCI, competitive local phone carrier Teleport, IBM's global communications network and other deals. AT&T officials said they expected Bell Atlantic to oppose their deal. AT&T has sought to block Bell Atlantic's $53 billion purchase of GTE Corp. AT&T officials have also hotly contested the 60 percent access figure Seidenberg cited, which they said included cable facilities where AT&T had only a minority ownership stake. Counting only cable systems that AT&T would control or operate, the company could reach about 25 to 30 percent of households, AT&T argues. The Bell Atlantic-GTE merger would give Bell Atlantic control over local phone lines into about one-third of U.S. homes, but Seidenberg said telephone companies are more heavily regulated than cable companies. In composite New York Stock Exchange trading, AT&T shares closed down 69 cents at $59.625 and MediaOne shares fell $1 to $77.375. Japanese Business in the United States
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