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Greenspan Has Left the Greenroom: <I>CNBC</I> Reduces Fed Hype

Also,'s Charles Johnson responds to Tuesday's column.
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Wither Alan?

SAN FRANCISCO -- Did somebody get the number of

da bomb

that went off on Wall Street

today? Its name was the

Nasdaq Composite

, and the number was 168, the biggest-ever point gain in the index's history. Or, if you prefer, 4550.28, the tech proxy's new all-time closing high.

Even if the Street seemed caught off-balance by the Comp's performance, the biggest surprise of the day was not that it soared to new heights. More shocking was the laissez-faire attitude


took to

Alan Greenspan's

second day of



I know Greenspan merely reread the

testimony given on Feb. 17. But the network everybody loves to hate gave only a passing nod to the Q&A, during which Greenspan acknowledged that equity gains in conjunction with rising productivity are "perfectly understandable and appropriate."

The chairman further backed away from last week's more

hawkish comments by denying the Fed specifically targets stock valuations with monetary policy.

If his comments last week were significant and prompted selling, why weren't they responsible for today's action? (Greenspan giveth, Greenspan taketh away and all that.)

Other factors clearly contributed to today's tech explosion. First,

Merrill Lynch

made positive comments about

America Online





(as well as biotech standout

Regeneron Pharmaceuticals


, which leapt 76%). Also, there were the higher

S&P 500

weightings granted to






, which each rose around 10%.

Finally, if you listened to or read the mainstream and (some) financial press last Friday and over the weekend, you would have thought the bull market was dead and buried. Blue-chips may still be struggling but, almost inevitably, that kind of sentiment proves misguided. It's when everyone is (

fa la la

and) feeling groovy that you should get worried.

But given that Greenspan's market-friendly comments coincided with the Comp's afternoon blastoff, it was startling


wasn't all over the "story."

Could it be the network that helped make Greenspan a megacelebrity -- heck, the one that helped his


get its own dressing room and PR handlers -- is toning down the rhetoric?



would be really shocking. Replies

I caught up with


Chairman and CEO Charles Johnson today, and (surprise!) he took exception to

last night's column.

Factually speaking, I erred on the schedule of shares coming off lockup. The most recent timetable is for 3.2 million shares in mid-March (not 6.2 million as I reported), 1.7 million in April, 735,000 in May and 14.2 million in June (vs. 8.3 million). All apologies.

But, more specifically, Johnson didn't like my little quip (it's always the quips) about how would be "$10 million in the hole" after taking a $50 million noncash charge for its deal with



, from which the company forecast $40 million in annualized net recurring revenue. "Recurring" being the operative word.

"Recurring never ends," he said, calling his company's deal with Sprint "the best deal ever done in B2B commerce."

Even in a worst-case scenario, "I'll get $40 million

worth of free advertising over the life of the agreement," he said. "Revenue sharing is into perpetuity" at 75% for, 25% for Sprint.

"As long as we're collecting

revenue, they get a piece," Johnson continued, emphasizing Sprint's incentive. (That's assuming, of course, there is perpetual revenue to split.) Based on's close today of 124, the value of the additional 1.35 million warrants Sprint can earn is about $38 million. "How hard do you think they'll work to get us there?" the CEO mused.

Johnson (again) professed the superiority of his company's revenue model vs. those of main competitors




Commerce One



Those companies charge large up-front fees to a relatively small number of customers for proprietary software and defer the payments over a period of time, he said. In contrast,'s model is based on collecting smaller recurring fees from a larger number of customers, namely for subscriptions and (increasingly over time) transactions done via its network.

That competitors such as Commerce One are migrating toward a browser-based model similar to's only gives Johnson more confidence that his firm has a competitive advantage.

Johnson compared to

America Online


, whose growth was powered mainly by the monthly subscriber fees paid by its ever-growing number of users.

Given the seriousness of business-to-business commerce, "we own the customer more deeply" than AOL, he said. Leaving's network "is not like losing your friends in a chat room." To date, the company's attrition rate is under 1% (a rate factored into the projections for the Sprint deal, BTW).

And, yes, he vowed will avoid the same growing pains that so famously hit AOL in the early stages of its growth.

There's more, but the bottom line -- I proffered -- was that we're still talking about potentially


of dollars in revenue for a company with a $3.8 billion market cap. Is that justified, I asked?'s stock is "way undervalued vs. other players in the space if you look at recurring revenue," Johnson replied, suggesting it is even cheaper vs. business-to-consumer names.

As to whether those names are fairly valued, the CEO conceded "none of them is justifiable."

But "in the offline world, there's a finite amount of revenue based upon space and inventories. In the online world, it's an infinite number," he continued. "This will all flush itself out sooner than later. The facts will speak for themselves."

Indeed they will.

And if -- which rose 6.3% today ("in my face," as the hoopsters say) -- becomes the AOL of B2B, I'll be the first to admit I was wrong.

And if the company never lives up to the promise of its stock? Well, you'll probably hear about that in this space, too.

Aaron L. Task writes daily for In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in He also doesn't invest in hedge funds or other private investment partnerships. He welcomes your feedback at