BusinessWeek Investor -- Inside Wall Street
Backing the Web's "Picks and Shovels"
A lot of gloomy faces showed up among 3,500 money managers who attended a recent Hambrecht & Quist technology Conference in San Francisco. But they still liked a lot of the upbeat stories from some tech companies. "In spite of the drop in tech prices, we found little to dampen our enthusiasm for quality stocks," says Mike Murphy, editor of the California Technology Stock Letter. Tech products, he observes, will continue to sell well because of the productivity enhancements they offer.
Among techs Murphy is high on: the makers of Net infrastructure software, which he says "sell the picks and shovels." His picks include Ariba (ARBA), which makes intranet and Net-based business-to-business infrastructure software for e-commerce, and Critical Path (CPTH), a provider of low-cost e-mail hosting services to Web portals and large corporations. The Old Economy companies need to be Net-savvy to slash costs and exploit the Web world, says Murphy. The only way for them to be Web-equipped is to bring in bullet-proof enterprise software that's quick and efficient," he says. "And that's what Ariba and Critical Path are good at."
Ariba, at 52 (down from 183 in March), should leap to 85 in six months, says Murphy. "Its revenues should jump this year to $200 million, up from 1999's $45.4 million. Critical Path, now at 31, is a cinch to hit 65, says Murphy. It was at 119 in March. It is a pure outsourcer of e-mail software. It costs $50 a year to host an e-mailbox: Critical does it for $4, says Murphy. America Online, E*Trade, and Network Solutions are customers. Revenues, he says, should explode--from $16 million in 1999 to $133 million in 2000 and to $240 million in 2001.By Gene G. Marcial