Critical Path, DoubleClick, 3Com and Conexant Systems

A selection of some of the most intriguing tech stock ideas on the Web. The items presented do not represent the views of TheStreet.com; rather, the collection is offered as a service to our members who may be scanning the Web for stock-related information.

Critical Path
Steve Harmon (Feb. 2)

Companies don't keep technicians on staff to make sure telephones keep going, and one of these days, the same will be true for email services, says Internet analyst Steve Harmon. That's why he likes the prospects of San Francisco-based startup Critical Path, which provides outsourced email services to corporations. The company recently filed its intention to raise $51.8 million in an initial public offering.

Founded in 1997, Critical Path was generating $897,000 in revenues by 1998. It also posted a $11.46 million net loss. But like other Internet-related companies, the story is the promise of the future. Although 62% of Critical Path's revenues come from the Web financial site E*trade (EGRP) and 30% from the Internet service provider Verio (VRIO), the company has been busy inking more deals. More than 100 companies use its services, including US West (USW) and Network Solutions (NSOL).

USA.NET and iName are two challengers that have strong footholds with portals and companies. Another big question is just how the Year 2000 problem will affect email. But this mission-critical (only telephone service is more critical to corporate communications) service has the potential to do extremely well as an industry. "If you consider the 10 million small- to medium-sized businesses in the U.S., the Fortune 500, the global companies, the increasingly sophisticated email offerings to come," says Harmon, "then the market for Critical Path seems ahead in many ways."

More information can be found at: www.internetnews.com

DoubleClick
Online Investor (Feb. 1)

DoubleClick (DCLK), the Internet ad agency, reported fourth-quarter losses that were slightly narrower than analysts expected, leading many to conclude that Internet users actually are responding to ads.

In the current Internet investment climate, any positives produce extravagant results. DoubleClick shares rose nearly 20% on the earnings news. But even DoubleClick's president, Kevin Ryan, doesn't expect a profit until the second or third quarter of 2000, at the earliest.

The company's march toward market share and strategic positioning shows promise, says Online Investor. The numbers keep getting less negative (for the Internet, that's positive). In addition, DoubleClick's biggest customer, AltaVista, which accounts for 44% of the company's revenue, renewed its contract. Even better, a 90-day cancellation clause that had been in the contract is now gone, though that's balanced by the fact that AltaVista can compete with DoubleClick for new business.

Wall Street cheered the news and one firm upped its price target on DoubleClick to 160. Shares are currently trading around 92. "At the very least," says Online Investor, "DoubleClick looks well positioned to gain more business in the near future," as e-commerce companies are including e-advertising in their plans more and more.

More information can be found at: fnews.yahoo.com

3Com
Adam Lashinsky (Feb. 5)

Shares of 3Com (COMS) have fallen nearly 30% since a Jan. 20 investor meeting in New York, even though there were no bombshells. What's going on? Wall Street was rattled by the tone of the presentation as well as of recent communications with analysts, says San Jose Mercury News columnist Adam Lashinsky.

To be fair, investors also are spooked by price cuts by Intel (INTC), an earnings shortfall at Newbridge Networks (NN) and negative comments about the networking industry from Cisco (CSCO).

But what's really on investors' minds is the possibility of an earnings disappointment. 3Com relies on February, the last month of its third fiscal quarter, for as much as 50% of its sales for the period. "There's a good chance that [3Com] may not make their published expectations," Goldman Sachs analyst Ajay Diwan tells Lashinsky.

3Com says its message hasn't changed since the Jan. 20 meeting, in which analysts seemed confident the company would earn the expected per-share earnings of 36 cents. "We aren't communicating anything different than we did at the end of the second [fiscal] quarter," a spokeswoman tells Lashinsky.

More information can be found at: www.sjmercury.com

Conexant Systems
Jeffery Freedman (Feb. 2)

Conexant Systems (CNXT), the largest company to focus exclusively on semiconductor products for communications, is "worth taking a peek at," says Raging Bull's Jeffery Freedman.

The company has been a "driving force" in communications for 30 years as part of Rockwell International (ROK), from which it was spun off early this year. As a Rockwell division, it accounted for $1.2 billion in business. That puts it in a league with major competitors Lucent (LU) and Texas Instruments (TXN).

Conexant posted a pre-tax $97.3 million loss in the first quarter, whih included $91 million in unusual and special charges. Revenues were up 11% over the year-ago period, though. The stock price has gyrated wildly between a high of 22 and a low of 13. It's now trading around 17. Conexant is "likely to be a roller coaster," says Freedman, "but one, at this reserve, that promises more summits than valleys."

More information can be found at: www.sjmercury.com

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