New Media

Do we reallywant to see Freeserve fail?

SINCE WHEN did Freeserve become Microsoft; an object ofcollective antipathy? When news was breaking of Freeserve's share freefall last week, both colleagues and contacts alike were laughing andcheering. Clearly, this was no laughing matter for Freeserve, whichin less than eight weeks has seen over £28m wiped off its initial flotationvalue of £1.5bn.

SINCE WHEN did Freeserve become Microsoft; an object ofcollective antipathy? When news was breaking of Freeserve's share freefall last week, both colleagues and contacts alike were laughing andcheering. Clearly, this was no laughing matter for Freeserve, whichin less than eight weeks has seen over £28m wiped off its initial flotationvalue of £1.5bn.

Freeserve has become the child that did so wellit found itself at university at the tender age of one - everyone expected afall, but do we really want to see it fail? Not that it will if thoseclever, hard-working chaps there have anything to do with it, and notwhile it keeps bringing out new services, such as InsuranceCity.com,to tie in new users. But the one thing it has little control over is itsfluctuating share price and that the doubters are already dismissing InternetIPOs (initial public offerings) as flashes in the pan. But is thisjust the market trying to find a sustainable, realistic ground?

Cityanalysts are now severely talking Freeserve down, expecting it to settle atjust 60p, under half of its hyped-up 150p July issue price and well belowits 244p peak. Granted the competition has intensified beyond belief sinceits launch - there must be over 250 free ISPs in the UK now - butFreeserve's advantage is its brand and it's synonymous with the term freeISP. Expect it to claw back value tomorrow when it details its latest usernumbers, believed to be around the 1.4 million mark.

I think partof the problem is the market got bored very quickly with Freeserve, andovervalued Internet stocks from young firms that have never made a profit.Freeserve's offer was oversubscribed 30 times back in July, but now someanalysts are even advising a sell.

Of the 12 European Internet IPOs sinceJune, all but two are now trading below their first day'sclose-of-business price.

QXL isn't having any doubts aboutforging ahead with its IPO, but with a reduced price tag of £242m onshares priced 180p-205p. QXL is clearly going to experience a tense timewhen it debuts next month, but I'm tempted to buy its shares just on themore realistic issue price.

Stocking up the exchange

Curiously, thedecline of Internet stocks coincided with the news that the London Stock Exchangeis preparing to launch techMARK, a new market for technology companies,in November. Seen as an attempt to ape some of the success of New York'sNasdaq and the EuroNM (Neuer Markt) on the Continent, it will takeover 170 already-listed stocks, that'll keep their existing FTSEindex and industry classifications, including all firms in the FTSEInternational sub-sectors of computer hardware, computer services,Internet (in goes Freeserve), semiconductors, software andtelecoms gear.

Eyebrows were raised when Glaxo Wellcome and SmithklineBeecham, certainly not technology stocks, were somehow lumped into thissub-sector, but in the long term, if Internet stocks can't clawback value, then these established giants may prove useful for a market thatneeds to stay afloat.

Thanks to techMARK doors will open to high-growthfirms without the normal three-year trading record, but it requires atleast £50m market capitalisation on float and detailed quarterly reports- a positive move towards reporting honest revenue - which most Internetcompanies are currently loathe to do, given the lack of profit.

amyv@qpp.co.uk