FW: ATC WIRE -- 2/24/97

Dan Kohn (dan@teledesic.com)
Tue, 4 Mar 1997 13:58:34 -0800


I'm running a week behind here on some of my mail, but this is a new=20
source of bits that covers more trade rages than Edupage and has more=20
of a bite. He also writes a very influential column every two weeks.=20
This is the guy who single-handedly destroyed $2 billion of=20
Netscape's market value by expressing doubt in their long-term=20
prospects.

- dan

-----Original Message-----
From: Bill Gurley [SMTP:bgurley@abovethecrowd.com]
Sent: Monday, February 24, 1997 9:07 PM
To: atcwire@abovethecrowd.com
Subject: ATC WIRE -- 2/24/97

ATC WIRE: WEEKLY UPDATE
February 24, 1997
DMG Technology Group
J. William Gurley
bill_gurley@dmgtech.com
415-614-1159

SUMMARY
In general, last week was a slow week for Internet news. Two topics=20
that
continued to gain steam were the 56K standards battle and the ever=20
popular
"push" paradigm. We are still perplexed by the fact that half of=20
these
push products would be more appropriately defined as automated pull.=20
Well,
no reason to waste time if there is nothing to say. Here are the=20
pertinent
stories:

INTERNET SOFTWARE
'Net Mail Trade-Off, CommunicationsWeek
(http://www.techweb.com/se/techsearch.cgi)
E-mail Users Beware:, CommunicationsWeek
(http://techweb.cmp.com/cw/cwi/netnews/021797/news0221-4.html)

Communications Week offers two articles discussing the willingness of=20
large
corporations to adopt Internet standard e-mail. In general, there=20
appears
to be some concern that the current version of the IMAP standard does=20
not
support higher-end mail features such as receipt notification.=20
However, in
most accounts that are considering Internet standard mail, the mixed
platform environment prohibits the use of those features anyway. The=20
beta
for Netscape's (NSCP#@, $31) Messenger Server 3.0 is due out next=20
week, so
we should expect the reviews to follow shortly thereafter. As we have=20
mentioned previously, we believe the initial feedback regarding these=20
products to be critical to the Netscape investment story.

Push Marketers Brace For Shove From Biggies, Interactive Week
(http://www.zdnet.com/intweek/print/970217/inwk0006.html)
Time to pay for the Internet binge nears, Infoworld
(http://www.infoworld.com/cgi-bin/displayArchives.pl?dt_iwe07-97_21.htm =

)
FTP Software fighting irrelevancy, news.com
(http://www.news.com/News/Item/0,4,8088,00.html)

We had originally thought that "push" technology had reached its peak=20
buzz
level around early December during Internet World in New York City.=20
Boy
were we wrong. The past few weeks saw push technology featured on=20
the
cover of every trade magazine, as well as Wired and Business Week.=20
The two
articles we have chosen offer a bit of pragmatism among all this=20
hoopla.
It will be very difficult for stand-alone software companies to=20
establish
successful business models selling technology that in all reality=20
belongs
in the underlying platform. The key browser providers are planning to
implement their own versions of "push," and previously established=20
push
companies will need a compelling business case above and beyond the
technical implementation of the said feature. To add credence to=20
this
theory, we have provided a recent article from CNET whose title tells=20
the
entire story.

INTERNET HARDWARE/INFRASTRUCTURE
Nonstandard 56Kbps modem activity stirs controversy, Infoworld
(http://www.infoworld.com/cgi-bin/displayArchives.pl?dt_iwe07-97_5.htm) =

Quicker modems get mixed reviews, Computerworld
(http://www.computerworld.com/search/AT-html/9702/970217SL7modem.html)=0D =
=20
=0A=

The 56K modem battle raged on last week as both sides stuck hard with=20
their
position. In Infoworld, US Robotics'
(USRX, $57) CEO, Casey Cowell, was quite definitive, stating "I can=20
tell
you....there is not an agreement." Meanwhile, the buzz began to=20
spread
that perhaps neither solution could provide true 56K service and that=20
most
users will end up connecting in the 40K range which is admittedly=20
faster
than 28.8K. We would point out however, that these speeds represent=20
only
connection speeds. The actual throughput will be dependent on the
implementation behind the modem concentrator. One note we picked up=20
on
last week with regard to this issue -- it turns out that America=20
Online
(AOL, $35) has more than one reason to be excited about the X2=20
standard.
Not only is AOL interested in offering a differentiated users=20
experience in
terms of speed, but AOL hopes to boost its "other revenue" line by
reselling modems. In other words, AOL will be purchasing=20
concentrators and
modems, and reselling the modems to end-users. Recently, AOL has made=20
a
rather large commitment to grow its auxiliary revenues and it appears=20
that
modem resale will help foot that bill.

INTERNET SERVICE
ISPs' Growing Pains: Show Me The Money, Interactive Week
February 17, 1997, pp. 1
ISPs Face Losses, Consolidation, Interactive Week
(http://www.zdnet.com/intweek/print/970217/inwk0034.html)
ISP to Unclog Net Pipes, PC Week
(http://www.pcweek.com/news/0217/17isp.html)
ISPs Team Up to Form New Trade Association, Interactive Week
(http://www.zdnet.com/intweek/print/970217/inwk0007.html)

The press continues to highlight the difficult financial position of=20
most
stand-alone ISPs. It appears that losses continue to mount, despite=20
the
fact that revenue has grown to the point where we may have previously
expected economies of scale to take hold. We continue to hear of
evolutionary moves away from unlimited pricing that we feel are=20
encouraged
by these financial difficulties. One particular example is noted in=20
the
above PC Week article that discusses Concentric's plan to sell T-1=20
access
based on average use, as opposed to a flat-fee. Pricing ranges from=20
$1,095
up to $2,695, depending upon average load. Lastly, several smaller=20
ISPs,
have teamed together to form a trade association that will focus on
protecting the rights of ISPs. We believe that the impetus for this
formation is tied more to the fact that as the Internet continues to
commercialize, the smaller ISPs will have a harder time maintaining
interconnect agreements. One word of caution for investors -- make=20
sure
that your equipment companies are not over exposed to struggling ISPs=20
with
less and less access to capital.

INTERNET MEDIA
Disney moves ahead, slowly, news.com
(http://www.news.com/News/Item/0,4,8177,00.html)

The media space was extremely quiet this week (net the push=20
onslaught), but
there was an interesting story regarding Disney (DIS, $75).=20
Apparently the
company feels a need to have a major presence on the Web, but the=20
company
is cautious regarding the potential for revenue. We think this=20
highlights
the fact that the mass media "hit" business is one that has yet to be
replicated on the Internet. It is our belief that the Internet is a=20
step
beyond Cable TV in terms of the fragmentation of the user community.=20
This
may imply that mass media hits will simply not happen on the=20
Internet.
C'est la vie.

RANDOM THOUGHTS
Cisco's Web Server Is Small in More Ways Than One, PC Week
(http://www.pcweek.com/reviews/0217/17micro.html)

Many of you may have heard of Cisco's (CSCO#, $58) new offering in the=20
Web
Server space -- a $1,000 box that hangs on the LAN and serves up Web=20
pages.
While it may have been quite seductive to extrapolate that this=20
product
signaled a potential conflict between Cisco and the other platform
providers, according to this PC Week review, there is no need to get
lathered-up. "We believe the money would be better spent on a low-end=20
PC
than a proprietary, closed system such as Cisco's Web server." Could=20
it be
that "PC" Week is biased. The review criticized both the performance,=20
as
well as the expandability. Perhaps Communications Week or LAN Times=20
has a
different opinion.

ATC Wire focuses on issues with respect to the Internet that are of
interest to institutional investors. It is distributed through First=20
Call,
fax and e-mail. To be placed on the distribution list contact your
Deutsche Morgan Grenfell salesperson. As always, feedback is both=20
welcomed
and encouraged.

# Deutsche Morgan Grenfell Inc. makes a market in this security. @=20
Deutsche
Morgan Grenfell Inc. Or one of its affiliates managed or co-managed a
public offering of securities for this company within the last three=20
years.
Stocks priced 2/21/97.

Copyright =E3 Deutsche Morgan Grenfell Inc. 1997. All rights reserved.=20
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