Bear Stearns Analysts Bullish On Internet Stocks Following Bear Stearns Internet Conference.

NEW YORK--(BUSINESS WIRE)--June 16, 1999--

Bear Stearns Internet analysts Scott Ehrens and Robert Fagin held a salesforce call this morning announcing their bullish outlook for the Internet sector. Bear Stearns' Internet conference, part of The Bear Stearns 10th annual Technology Conference being held at the Grand Hyatt in New York City this week, was a resounding success, with roughly 1,300 investors in attendance and 47 companies presenting. The tone was uniformly upbeat, in contrast to the correction in the stock prices recently. Both Mr. Ehrens and Mr. Fagin said the opportunity to selectively invest in the sector is great, and they think Internet stocks have bottomed out as we get closer to second quarter reporting season (starts the second week of July.) Below, are the ratings on all of their followed stocks and recaps of the major announcements from yesterday's conference.

About.com (Attractive) -CEO Scott Kurnit gave an overview of the company, highlighting the changes since the company's March 24 IPO. The company has been active, changing its name from MiningCo.com and signing an e-commerce pact with Borders Online. About.com has received positive feedback concerning its name change and the recent national branding campaign TV advertisements. The company changed its name primarily to align its public identity with its broad platform aspirations. The recent Borders Online agreement has provided the company with a good e-commerce partner along with slotting fees as the company strives to build a e-commerce platform from its unique navigation and community services. About.com will receive slotting fees for placing Borders banners on its network while giving its 650 guides the opportunity to create their own bookstores and provide users with book recommendations and links to Borders site. The company revealed in the breakout session that it would receive 10% of every purchase on Borders site by users coming from the About.com site. Other highlights from the presentation include the following:

About.com also provided some color on its network strategy, revealing that roughly two-thirds of its users access more than 3 guide sites per visit, demonstrating the stickiness of the service and the networks ability to function as a community and rather than merely sending users out onto the Web.

We recently highlighted About.com as having a highly scaleable platform attractive to investors in our industry note last week. Demonstrating this point About.com revealed that it has been able to build the remote network of part-time guides at roughly 10% of the cost that it would take to create similar content with full time employees.

Adobe Systems Incorporated (Attractive) - Bruce Chizen, Executive Vice President, Worldwide Products & Marketing

Adobe's growth continues to be driven by the Web. Based on a review of product registrations, Adobe announced 34% of their business was driven by the Internet in 1H99 (i.e., used primarily to create or enhance a Web site). Adobe noted that 62% of all Web designers use both Adobe Photoshop and Adobe Illustrator. The company noted that Adobe Acrobat revenues approximately doubled year over year in 2Q and will represent over $100 million in revenues in FY99. The company's Dynamic Media (After Effects and Premiere) business also doubled year over year. The company will be reporting 2Q99 earnings this Thursday (6/17/99) after the close.

Allaire (Neutral) - David Orfao, President & CEO 

Allaire announced the acquisition of Live Software, a California-based company, in a pooling transaction for 550,000 shares of Allaire common stock (about $24.2 million). Live Software markets a leading Java development and deployment engine called JRUN. The Live Software acquisition will allow Allaire to add Java capabilities to its existing ColdFusion product. Allaire will also continue to market JRUN as a standalone product (about $595 per processor). The acquisition is also intended to extend the capabilities of HomeSite, Allaire's tool for creating Web page front ends by allowing HomeSite to function as a visual front end for JRUN and JRUN/ColdFusion developers.

Live Software has issued about 170,000 licenses for its software and an there are an estimated 80,000 active JRUN developers. Allaire indicated that the acquisition should be not impact the company's goal of exiting 1999 profitably and we are leaving our 1999 earnings estimate of $(0.40) and our 2000 earnings estimate of $0.17 unchanged. Live Software's revenues year to date are about $1.5 million and the only significant costs related to the acquisition are the eight Live Software developers joining the company. The acquisition should be positive in 2000 but we are leaving estimates unchanged pending additional visibility into market acceptance of the product and costs related to documentation, company integration and marketing. An 8-K/A has been filed with the SEC in conjunction with this transaction.

Allaire's forthcoming product, Tempest (an applications framework for e-commerce, content management and customer interaction management), looks to be on track to be introduced in July. Allaire also filed an S1 with the SEC to allow certain existing shareholders to sell 288,583 shares of common stock. These shares will be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933.

America Online (Buy) - Bob Pittman, President and COO

The key driver of AOL's business is the consumer, not technology. Consumers are brand buyers and driven by convenience. (For example, the microwave cooks worse than the oven, however it is more convenient). AOL is the leading brand on the Internet, with 51% awareness; no other Internet company is in double-digits. The Internet is also extremely convenient in terms of retrieving information and purchasing products.

The Internet is a productivity enhancer and AOL's goal is to make it a necessity. AOL is not a fad. Fads typically begin with high usage that rapidly declines. However, AOL's usage pattern is similar to those of other successful products such as the TV or VCR: usage begins low and increases over time. In September 1996, AOL users were spending an average of 14 minutes per day on the service. In March, they were up to 55 minutes per day. In addition, one-third of AOL users are online seven days a week and half log on at least five days a week.

AOL is not viewed as a traditional media company from its advertising and commerce partners, but rather as a strategic partner. This is evidenced by the fact that 90% of its advertising is not coming from advertising agencies and most are negotiated directly with the company CEO or CFO and do not with the traditional media buyers.

AOL believes broadband will be an ad-on to narrowband, much the way 56K was an upgrade to 26.6K service. For example, 48% of Internet subscribers prefer to receive broadband service from their current ISP, and only 12% from their phone company and 10% from their cable company. AOL's pop-up screens will be an ideal marketing tool for broadband. AOL will pursue all forms of broadband access, including DSL, cable, satellite, and wireless.

Digital River (Buy) - President Perry Steiner delivered a comprehensive overview of the company's operations and issued some new performance statistics place the company's hosted e-commerce sites in favorable position vis-a-vis other e-commerce sites. Steiner indicated that during the recent weeks when other sites experienced service problems, Digital River's hosted e-commerce sites averaged less than 1 second of latency (the amount of time to deliver web pages to the user). This average compares favorably to other e-commerce sites which averaged more than 2 seconds during the same time period. Similarly, the company's average response time to customer email requests was 54 minutes versus several hours for other sites such as barnesandnoble.com. Interestingly the survey also indicated that Amazon.com remains one of the most consumer focused e-commerce sites on the web with an average response time of 34 minutes. These statistics indicate that Digital River offers not only a comprehensive, but also a high quality outsourcing solution to companies looking to build an online e-commerce presence. Steiner also indicated that he is comfortable with analysts' revenue projections for the second quarter, giving us confidence in our revenue estimate of $14.1 million for 2Q99.

EarthWeb (Attractive) - CEO Jack Hidray and CFO Irene Math re-acquainted investors with the company's progress since its IPO in December including the strong growth in subscription services (12,000 members added in six months since inception) and recent acquisitions including DICE.com, the online source for IT jobs. The company remains committed to providing a variety of services to the highly desirable audience of IT professionals. EarthWeb pointed to last week's multi-year affinity credit card agreement with MBNA, offering co-branded credit cards to IT professionals, as another example of this commitment. The MBNA agreement will allow IT professionals MBNA-EarthWeb co-branded credit cards with the opportunity to receive 20% discounts off EarthWeb's ITKnowledge subscription service. The deal is worth more than $1 million to EarthWeb over the term of the agreement, providing the company with royalties and a percentage of each purchase made with the credit cards. The offer is also another example of the company's efforts to diversify its revenue streams away from its existing advertising-only model. Advertising has traditionally accounted for 98% of EarthWeb's revenues, but the company expects that the new programs such as the MBNA deal and its subscription business will increase non-advertising revenues to 35% of total sales in the long run.

Excite@Home (Buy) - Ken Goldman, CFO

The growth drivers of the company:

1) Subscribers - Ken mentioned that the company is on target to

reach its goal of the low 600,000 range, which is inline with our

estimate of 614,000

2) International - Excite@Home now has over 9 million homes in its

total footprint that are outside North America, including the

recently announced an agreement with Optus in Australia, as well

as the ventures in Belgium, Holland and Japan.

Ken also reiterated the company's stance that the ruling in Portland (that upheld the decision by the local authority to force AT&T to open its cable pipe to competing ISPs) will be overturned by the FCC. On that note, FCC chairman William Kennard today stated that "The FCC, as I've said before, has the authority to set [a national broadband policy], and we have one. We have taken a deregulatory approach, an approach that will let this nascent industry flourish." Excite is scheduled to split its stock two-for-one after the close of the market on Wednesday, June 16.

Inktomi (Buy) - David Peterschmidt, Chairman, President & CEO

Inktomi announced its much-anticipated fourth product, Directory Engine. Directory Engine is the first automated directory-building technology for the Internet, i.e., can index an entire Web site and categorize pages on the site automatically. Up to 1.5 million documents at one site can be indexed. The product is fully customizable, so customers can have the technology search for specific terms or classify data in specific categories. The product can also add breadth to directories with human editors such as Yahoo!; sites that use humans to index can expand their index using Inktomi's directory technology, positioning Directory Engine as a "force multiplier" for human-edited sites. The technology has about 75% accuracy vs. humans according to the company.

The Directory Engine utilizes new technology developed by Inktomi called "concept induction." This technology will be integrated into the company's core technology base so that it may also be leveraged in future versions of existing products such as Search Engine. Inktomi also noted that it is adding eight to ten new Search Engine customers a quarter. Dave Peterschmidt commented that "Europe looks poised to take off" in terms of that geography's investment in core Internet infrastructure.

Inktomi's Shopping Engine (offers pricing and feature comparison for the Web) seems well on track. The company has signed on 20 portals and 350 merchants. Shopping Engine can be previewed at the CNN, LookSmart or Snap! Web sites.

Lycos (Buy) - Bob Davis, President and CEO

The strategy for fiscal 1999 (which ends July) has been to expand reach. Although the year is not over, it is pretty clear Lycos has been successful. Its reach has grown from around 14% in the beginning of 1998 to 47% as of April. The strategy for fiscal 2000 will be to increase page views. (Remember that Yahoo! and Lycos had roughly the same reach in March, however Yahoo! had 4x the average daily page views, and therefore much more revenue.) Considering its ability to execute on its reach goal, which includes the successful integration of a number of acquisitions, we are betting that Lycos will successfully expand its page views as well. Lycos announced "Lycos e-market," an e-commerce site that has aggregated over 100 name brand retailers, all of which have quality fulfillment operations. Lycos will handle the hosting as well as offer a universal wallet, transaction processing, and reporting. Lycos will monetize the site with a slotting fee and a percent of the sale. The site will be unveiled later this month. Lycos also mentioned that it may spin out its European joint venture with Bertelsmann in an initial public offering. Such a spin off would allow Lycos to roll up the revenue generated from this venture in its P&L (Currently Lycos does not consolidate the revenue that it generates from the international joint ventures.) This would allow for better comparisons among its peers (in terms of revenue multiples) and give the company a currency to use for consolidation of the European Internet market. The company stated that it would most likely occur in late summer.

Macromedia (Attractive) - Rob Burgess, Chairman & CEO and Betsey Nelson, SVP and CFO

Macromedia announced the availability of Flash 4, the new version of its Flash authoring software. Flash 4 includes integrated support for high-fidelity MP3 streaming audio and commands for easily creating Web sites with sophisticated interactivity. In addition, Flash 4 streamlines the development process with a revamped authoring environment optimized to help developers create bandwidth-efficient Web sites. Flash 4 is available for Windows 95/98, Windows NT, and MacOS for an estimated street price of $299 in North America. Current registered Flash users can upgrade to Flash 4 for $129.

SportsLine USA (Neutral) - Michael Levy, President and CEO

SportsLine mentioned that traffic has remained strong on its site, with average daily page views of 8 million in May, which is inline with April levels. This is down slightly from March levels, however March is a seasonally strong since the NCAA mans basketball tournament occurs, which is arguably the biggest sporting event of the year. SportsLine is the leader in online sports internationally. The acquisition of sportsweb.com continues to round out SportsLine's European sports offering while increasing its lead over its competitors in international sports content. SportsLine already owns Soccernet, the leader in online soccer information, and CricInfo, the leader in online cricket information. However, in the U.S., it still trails ESPN in terms of traffic and brand awareness. In order to remedy this situation, the company has announced that it will launch a major brand and PR campaign, which could include leveraging CBS's radio distribution. In addition, CBS appears to be on board; CBS's ad sales force has been mandated to sell SportsLine impressions and is now commissioned on these sales.

Ticketmaster Online - CitySearch (Attractive) - CEO Charles Conn gave an update of TMCS's activities in the past few months which have been mostly overshadowed by the proposed, and now dissolved, merger with Lycos-USA Networks. The company continues to execute on its operating strategy to provide everything local on the web and recently acquired two personal online dating services, The One and Only and Match.com, to meet this goal. The two online dating companies recorded more than $7 million revenues in 1998 and have a combined 3 million users with 400,000 active members, while adding 70 million pageviews per month to the TMCS network. In its existing businesses, TMCS is executing ahead of expectations having launched its 29th City guide in St. Louis this past Monday, putting the company well ahead of its internal plans. The newest city guide is another also example of the efficiency gained through its regional hub strategy which allows TMCS to launch new city guides from regional sites with less infrastructure than previously required - new sites now require only 12 people to initiate versus the roughly 50 people required under the old method. In its ticketing business, TMCS continues to deliver impressive performance with 41% of Ticketmaster tickets sold for the recent Barbara Streisand concerts purchased online and 35% of TM's tickets for Bruce Springsteen's concerts in New Jersey purchased electronically. These percentages are well above last quarter's 8.7% of TM tickets sold online. The solid performance on both fronts bodes well for the upcoming quarter and TMCS stated that it is more than comfortable with revenue estimates for the second quarter (we have estimated $16.4 million for 2Q99).

Yahoo! (Buy) - Tim Koogle, Chairman and CEO, and Gary Valenzuela, SVP Finance & Admin, CFO

Brand, Content, and Distribution are key, and Profits do Matter - and Yahoo! again demonstrated that it has them all, reiterating its dominance in the content category. Yahoo announced "Fusion Marketing Online," a subject that they will provide additional detail on in the near future. Fusion Marketing Online is Yahoo!'s strategy of working more closely with e-commerce partners, and by doing so potentially generate larger average deal sizes with longer average contract lengths. This will create larger backlog and greater visibility in earnings, which could reduce the seasonal effects on advertising revenue. In addition, Yahoo! mentioned that it will be reporting its second quarter results on Wednesday, July 7.

Companies Mentioned: About.com(a)(b) (BOUT), Adobe Systems(a) (ADBE), Allaire(a) (ALLR), America Online (AOL), Digital River(a)(b) (DRIV), EarthWeb(a)(b) (EWBX), Excite@Home(a) (ATHM), Inktomi(a) (INKT), Lycos(a)(b) (LCOS), Macromedia(a) (MACR), SportsLine USA(a) (SPLN), Ticketmaster Online-CitySearch(a)(b) (TMCS), and Yahoo!(a) (YHOO)

(a) Bear, Stearns & Co. Inc. is a market maker in the security of

this company and may have a long or short position in the

security.

(b) Within the past three years, Bear, Stearns & Co. Inc. or one of

its affiliates was the manager (co-manager) of a public offering

of securities of this company.

Any recommendation contained in this report may not be suitable for all investors. Moreover, although the information contained herein has been obtained from sources believed to be reliable, its accuracy and completeness cannot be guaranteed. Bear Stearns may make markets and effect transactions, including transactions contrary to any recommendations herein, or have positions in the securities mentioned herein (or options with respect thereto) and may also have performed investment banking services for the issuers of such securities. In addition, employees of Bear Stearns may have positions and effect transactions in the securities or options of the issuers mentioned herein and may serve as directors of such issuers. Copyright (c) 1999. All rights reserved by Bear, Stearns & Co. Inc.