eMailbag Monday: AltaVista, Broadcom, Excite, Web Brokers

First reader up writes:

"Enjoyed your piece on Alta Vista. Can you explain how this (Alta Vista spin out) will work with CPQ shareholders? I own some CPQ, will I get some AltaVista shares when it goes public? How do you value how many AV shares per CPQ share you might get? I don't "qualify" for IPO shares and probably won't be able to buy any until it is in nosebleed territory. What do you think of buying CPQ to play the AV deal?"

Reply: No official IPO documents have been filed for AltaVista. Until they are we cannot speculate how Compaq will proceed. Compaq is a $74 billion market capitalization company so we don't think many investors would own CPQ just for its AltaVista assets. More once (if) Compaq makes a real move.

Broadly Speaking

"I enjoy your newsletter and your excellent evaluations of Internet stocks. You have had good things to say about Broadcom Corp., which makes chips for cable boxes and xDSL modems. Right now they have a dominant market share for what they make. Could you explain where their future competition is going to come from?

Given the rapid growth that is expected in this sector, what is to keep larger semiconductor manufacturers, like Intel, from moving into their turf?"

Reply: Broadcom competes against Rockwell, Philips, LSI Logic, VLSI, SGS-Thomson, C-Cube, Toshiba, Lucent, Level One, National Semiconductor, AMD, Analog Devices, Alcatel, Motorola and Globespan across its different product lines already. Intel could be a threat if it wants to be. We think the Asian chipmakers may pose the longest-term threat if a Sony or Samsung starts mass-producing cable modem boxes like they did TVs (or if TVs come bundled with cable modem innards).

Home Is Where The Exchange Ratio Is

"Do you have info about the ATHM-XCIT deal. I would like to know more about the value of the Excite stock. Is it linked with the ATHM value since the deal has been done?"

Reply: The deal was announced January 19 but not "done" since it must be approved by shareholders and others (that process is underway now). @Home (NASDAQ:ATHM) agreed to issue 1.041902 shares of common stock for each share of Excite (NASDAQ:XCIT). When the deal was announced the value was $6.7 billion.

Here's a part of the offer that many people probably didn't look at: @Home has the option to acquire a 19.9% interest in Excite which becomes exercisable "under certain customary circumstances."

Online Brokers Or Fixing?

"I am constantly having trouble using my online broker. I have been with the company since they started years ago, but I am becoming quite sick of not even being able to make a trade because they're always having trouble with their servers (now if everyone would just switch back to mainframes . . . ). I was wondering whether you might be willing to poll your readers and find out which online brokers are most reliable."

Reply: Exasperated-Trade? You didn't say who your broker was but there's been much publicized bugs at E*TRADE (NASDAQ:EGRP) recently. Ironically, it was ranked #1 by third-party surveyors. with the glitches we'll see if that holds. But your wish is our command. Readers who want to vote for their favorite Web-based broker can do so here - click now

Convergence Or Glue

"I enjoy your column greatly; however, what I would also be curious about is how the stocks that are analyzed flow through to other business sectors and companies. With the convergence of voice, video and data, and the growing importance of cable as a medium to deliver Internet content, I think it would greatly interest your readers to learn how many high technology companies are closely interrelated with Internet companies."

Reply: Many high-tech firms have Internet capabilities built into services or products, too many to list. In fact, most media, technology, PC, communications and entertainment corporations are Internet enabled to some degree. The rollout of video and cable is not so much convergence as evolution of the species.

If we were to look at the above five industries -- media, technology, PC, communications and entertainment -- at the center of this would be "Internet." We see it as the glue of the future for all of them.

HotWatch 10 For '99

"Congratulations on some prescient calls in your early January "Ten to Watch" list (ISR, January 6). Considering how incredibly well they all did, on average, you're going to have a pretty hard time keeping pace with yourself in your February subscriber's newsletter."

Reply: HotWatch updates month to month but also maintains the stocks it deems worth watching no matter if they were picked in January or any month.

Accolades for Internet Stock Report:

"Fresh and provocative" -CBS Marketwatch, who named Steve Harmon one of the top Internet stock analysts and only independent one honored

"I am a huge fan of Steve Harmon's analysis" -Kleiner Perkins' John Doerr