From: Linda (email@example.com)
Date: Thu Jun 01 2000 - 12:02:10 PDT
Goldman Sachs Posts E-tail Death Watch
By Nora Macaluso
June 1, 2000
According to a new report from Goldman Sachs, at least 10 key e-tailers will
be faced with the daunting task of raising cash as soon as this year or next.
Among the companies identified by Goldman analyst Anthony Noto are
Beyond.com (Nasdaq: BYND), Autoweb, Inc. and Peapod, Inc. (Nasdaq:
Noto calculated the cash positions of 32 publicly traded online retailers by subtracting each
company's operating loss -- or cash burn rate -- in each quarter from the company's first
quarter cash position. "We estimate that 10 will need to raise money this year or early next
year, which could prove challenging for some with unproven business models and lack of
category leadership," Noto wrote.
'Pioneers' Fare Well
Other companies, most notably Amazon.com (Nasdaq: AMZN) and Priceline.com (Nasdaq:
PCLN), are "pioneers with proven business models," and will not need to look to capital markets
for funding, according to Noto. Priceline is on track to reach breakeven in this year's fourth
quarter, he said.
Seven of the 32 firms have sold securities to raise money this year, while others have cut
spending to conserve cash in light of a downturn in e-commerce stock prices, Noto added.
The e-commerce sector has fallen out of favor amid skepticism about the likelihood of profits,
and companies with huge cash-burn rates and no income have already started to fall by the
wayside. "A continued shakeout will likely strengthen positions for leadership companies and
decrease competitive clutter," Noto said in his report.
Noto listed Barneandnoble.com (Nasdaq: BNBN), eBay, Inc. (Nasdaq: EBAY) and Ashford.com
(Nasdaq: ASFD) among "first-tier" companies that have enough cash on hand to fund their
expansion plans without tapping the markets. eBay, he noted, is currently the only profitable
Drugstore.com (Nasdaq: DSCM), HomeGrocer.com (Nasdaq: HOMG), Mothernature.com
(Nasdaq: MTHR) and PlanetRx (Nasdaq: PLRX) all made Noto's list of "second-tier" companies
that will have to conserve cash this year and may need to seek financing as well.
Other e-tailers that may have difficulty staying in business, according to Noto, are Pets.com
(Nasdaq: IPET), Autobytel.com (Nasdaq: ABTL) and Buy.com (Nasdaq: BUYX).
With investors becoming more selective about e-commerce securities, the companies are
finding it harder to raise cash. Noto said companies in his second and third tier groups that
need to raise capital this year "will have difficulty."
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