LONDON -- Last week, Freeserve (FREE) , the U.K.'s largest Internet service provider, screamed 82% higher over a two-day period. The cause: A mostly empty announcement that it had joined hands with Cellnet, the mobile phone division of British Telecom (BTY) , on vague plans for a mobile-commerce venture.
Since then, Freeserve has dipped slightly, but is still up 244% since listing in late July. The money-losing company (the modifier admittedly does little to distinguish it from many companies in the Internet arena) sports a market capitalization of nearly $7.5 billion.
While Freeserve is a leader in the potentially lucrative U.K. Internet market, its movement is another example of the wild world of tech stocks. Over the last 12 months the
Nasdaq Composite Index
has surged some 80%, adding $2 trillion in market capitalization. In the last month alone, the index has leaped more than 20%, setting record after record as investors pile into stocks that promise to take part in building the next century's evolving information infrastructure.
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Clearly, Freeserve and many of the other tech stars have been driven less by real news and hard analysis than by a pervasive -- and persuasive -- sense that the sector's trend is strongly, perhaps irreversibly, up.
Freeserve's original business model was premised on advertising revenue and part of the metered fees phone users in the U.K. are charged. Plans to make money by cutting into consumers' phone bills, however, are expected to become quickly extinct. (
recently examined the
trends in Internet providers.)
The partnership with Cellnet is an attempt to address that strategic shortcoming. Trouble is, the deal is more about m-commerce chest-thumping than bottom lines. Not only has no money changed hands, but the two companies haven't even decided on a revenue-sharing model for the venture, which is expected to start by offering email services over mobile phones and expand to sports and financial information. Services like online stock trading will follow.
Ask about the potential market size for mobile commerce, expectations for which are pushing up Freeserve, and the only honest answer is that no one quite knows.
, a high-tech investment boutique in London, says the European m-commerce market, which was about 323 million euros ($323 million) in 1998, could grow at a compounded 236% per year to 23.6 billion euros by 2003.
But Falk Muller-Veerse, a Durlacher analyst, concedes the hype surrounding m-commerce is likely to lead to disappointment over the next three years, until perhaps 2004, when the mobile technology becomes available to make m-commerce a reality.
Until then, hype and hope will likely be Freeserve's most potent drivers.