Tuesday, August 22, 2006

Internet Stocks Worldwide in Collapse Mode-Recovering now

Internet Stocks in the World have had a rough time in the recent months, and this year in general. The big stocks like YHOO, EBAY and AMZN are down 40-50% since the beginning of the year. The Indian Internets, SIFY and REDF, correlate pretty well with YHOO, EBAY and AMZN (an ETF which has all three is HHH, in other words, SIFY and REDF correlate well with HHH). Since HHH has had the life sucked out of it in the last 3 months, SIFY and REDF has also lost a bunch.

What gives? More buyers than sellers.

The fundamentals of the sector are in tact. Growth prospects in the Internet sector worldwide are good-more of the traditional economy is turning toward the Net. It is too early to think that we have seen the peak-fundamental inventions like the Internet can lead to decades of wealth creation ideas based on them. And we are still in the beginning phases of the Internet and it's effect on our lives. Companies can't grow every year very consistently, but if you see the big picture, there's more to be made off the Internet, and the ones who are entrenched have a lot of data on user behavior to make it happen.

REDF and SIFY are sound companies financially, run by good managements, in an explosive market. Yahoo India poses a significant challenge to these two; but the Indian market is big enough to have a couple of players. REDF particularly seems to be executing very well; although they lack the offering of Yahoo Groups and Yahoo Finance, two of the top channels of Yahoo. I hope that Rediff and Sify focus on these; there's a lot of money to be made on the finance channels, and community building around niche topics, like Yahoo Groups, should be a central part of every long term player in the Internet space. Upstarts like Youtube and Myspace show the large value which can be realized by creating viral communities.

Sanjay John G.

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