Internet Stocks, CDNow and N2K, Electronic Arts, BVR Systems

Taking a look back at the year in Internet stocks.
Author:
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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.

Internet stocks

William Schaff

(12/22)

William Schaff, chief investment officer for

Bay Isle Financial Corp.

, takes a look back at the year assessing the winners and losers among technology stocks.

Topping the list of "good" companies -- those that won very big -- were, of course,

Yahoo

(YHOO)

and

America Online

(AOL)

. But beyond those well-known winners are firms that specialize in electronic storage, such as

EMC

(EMC)

,

Legato

(LGTO)

and

Network Appliance

(NTAP) - Get Report

. Communications companies also were "compelling" investments, including such firms as

Lucent

(LU)

,

Nokia

(NOKA)

,

Ascend Communications

(ASND) - Get Report

and

MCI Worldcom

(WCOM)

. Among hardware makers, winners included

Dell

(DELL) - Get Report

,

Sun Microsystems

(SUNW) - Get Report

and

Unisys

(UIS) - Get Report

.

On the other hand, enterprise application and software companies tended to not do as well.

Baan

(BAANF)

,

PeopleSoft

(PSFT)

and supply-chain software firm

Manugistics

(MANU) - Get Report

all declined.

How to do better next year? Long term, invest in companies that focus on "enhancing corporate productivity and, subsequently, profitability, through their products or services," says Schaff.

More information can be found at:

www.informationweek.com

Cdnow and N2K

Steve Harmon

(12/21)

In the online book and music competition, the planned merger of

Cdnow

(CDNW)

and

N2K

(NTKI)

should create a company that has what it takes to go head to head with

Amazon.com

(AMZN) - Get Report

, says Internet stock analyst Steve Harmon. A combined Cdnow-N2K would have had sales in the last quarter that were 40% higher than Amazon.com's, he says.

Though the battleground is now books and music, product lines with razor-thin margins, future fights could encompass many more products as the companies pit the e-tail networks they are building "mano a mano," Harmon says.

But before that larger battle takes place, it could be short-circuited by a takeover of Cdnow-N2K by, say, a

barnesandnoble.com

or

Barnes & Noble

(BKS) - Get Report

, either of which "ought to" acquire Cdnow-N2K if they really want to compete on the Web, says Harmon.

More information can be found at:

www.internetnews.com

Electronic Arts

Online Investor

(12/18)

The video game industry had a successful 1998, finally getting over a multi-year slump that left many casualties. Sales of entertainment software are up, an estimated 50% to 60% higher this year than last, so a company like

Electronic Arts

(ERTS)

, which has been taking over market share from

Nintendo

and

Sony

, should be doing just peachy. But "the stock has gone nowhere for the past six weeks," says

Online Investor

. "What gives?"

Electronic Arts stock rose from around 20 in early 1997 to a high of 57 in July. It's at 50 currently, and the recent plateau may just be an indication that market watchers consider the stock fully valued. But, then again, all 13 analysts that follow the stock rate it a "buy" or "strong buy," Online Invstor says. The company has enjoyed strong sales of new sports-oriented titles, such as "Madden NFL 99," "NASCAR 99" and "NHL 99." From March to September, sales rose 35% and earnings per share rose 177%. Analysts project average earnings growth of 24% annually over the next five years.

Nevertheless, investors may be waiting to see how Electronic Arts handles the transition to the next-generation consoles due out in the next year or so, at which time demand for video games could fluctuate. In response, Electronic Arts is gobbling up many talented developers and niche titles, says Online Investor. If the company can "successfully integrate its acquisitions, it will be sitting in the catbird's seat with a strong brand and a stable of talent."

More information can be found at:

fnews.yahoo.com

BVR Systems

Vivian Lewis

(12/23)

Although in this Christmas season it would be nice to no longer need military training, current world situations seem to demand it.

BVR Systems

(BVRSF)

, a spinoff from Israeli virtual reality software maker

BVR Technologies

(BVRTF)

, creates computer software for military training and simulation. Because of its sales and alliances, Vivian Lewis of the

Global Investing

newsletter thinks BVR Systems "is a screaming buy."

Among BVR's products are a host of mission simulators and trainers, for planes, armored vehicles, and guided weapons systems. From January to September 1998, revenues increased 74% to $31.1 million. And net income soared to $3.3 million, up 83%. The company has strategic deals with a variety of defense manufacturers around the world.

On the con side, there's an overhang of options and convertibles from its parent, which also has the right to any civilian applications developed. And the new company is expected to create dilutive U.S. or Euromarket convertibles. "Despite the negatives," says Lewis, "we think this one is a double."

More information can be found at:

www.tfc.com