Go.com (NYSE: GO) made an unspectacular debut Thursday as the shares formerly known as Infoseek were weak in their first day trading as a Disney (NYSE: DIS) tracking stock. There's a good reason for the weakness: The ticker is the new, but it's the same old story with the same old questions for Go.com.
Go.com closed at 35 7/16, about flat on a day when most technology and Internet stocks pushed the Nasdaq to yet another record high.
Disney's new tracking stock is likely to trade sideways for awhile. No one -- Wall Street analysts, users, and perhaps even Go.com management -- seems to know where the portal is heading.
Go.com: What's the future?
Go.com looks great on paper. Go.com now includes all the Disney sites, portal features and has what could be a key e-commerce component in Disney's catalog business. The potential is there, but questions abound about management and strategic vision. Meanwhile, Go.com is desperately in need of some good press.
In a nutshell, there are a lot of questions for Go.com to answer.
We'll start with the management, one of the main reasons Go.com hasn't voiced its future plans. Infoseek CEO Harry Motro has been officially a lame duck since September. Go.com is now run by new CEO Steven Bornstein, who was chief of Disney's Buena Vista Internet Group. Bornstein replaced the well-respected Jake Winebaum, who split to help start up eCompanies, an Internet incubator. In between all that shuffling, Patrick Naughton, an Infoseek executive vice president in charge of Disney' web sites, was ousted after being busted trying to solicit sex from a minor. (Bad press incident number one.)
That recap of the management-go-round is just the short version. A few Wall Street analysts noted that they haven't spoken to the new management and don't know how the new team will work together.
"The new management is in place, but I haven't had a chance to meet with them," said Derek Brown, an analyst at Volpe Brown Whelan, who had a "neutral" rating on Infoseek and will keep it for Go.com. "We've been playing phone tag the last few weeks."
Granted, Bornstein has only officially been on the job a day and there was a quiet period, but management better start talking fast to get Wall Street interested.
The other thorn in Go.com's side is GoTo.com (Nasdaq: GOTO), which claimed the green light logo well before Go.com came up with the idea. Now Go.com has 60 days to remove the same logo it has splashed all over Disney properties in a move that will cost it about $40 million. (Bad press incident number two.)
The interim logo looks rushed to say the least. It's not a good sign to take down a logo after a year of beating us over the head with it.
Analysts said the logo could become a branding issue, but it's too early to tell. Our guess is that logos and branding on the Web are very important and the GoTo.com lawsuit will become an issue for Go.com.
It also doesn't take a psychic to see that patience with Go.com could wear thin. On the Infoseek fourth quarter conference call, officials were mum on the plans for the combination with Disney. That lack of guidance kept analysts from talking up the stock even though Infoseek beat expectations for revenue and had a lower-than-expected loss.
Brown said the rest of 1999 will be a transitional period for Go.com. He said he intends to maintain coverage, but needs to hear more. James Preissler, Internet analyst for PaineWebber, said in a note he won't be covering Go.com as a separate entity. PaineWebber's Disney analyst, Chris Dixon, is covering Go.com as a part of Disney.
Here's what Brown -- and other analysts -- want to know about Go.com.
1. How will the parts be integrated? Go.com started out as a loose confederation of Disney and Infoseek/Starwave properties. Integration is why Disney bought Infoseek outright after about a year of being just partners. In many ways, the portal still is loosely tied together.
2. What's the growth strategy? Revenue was solid in Infoseek's fourth quarter, but traffic hasn't been impressive. Average daily page views were up 12 percent sequentially to 55 million in September. That growth rate lags Lycos (Nasdaq: LCOS) and Yahoo! (Nasdaq: LCOS). Registered user growth was also weak with 16 million registered users, up just 2 million from the prior quarter. Yahoo's registered user base jumped 23 percent sequentially to 80 million.
3. What are the financial possibilities? Disney included its catalog operations with Go.com, but management hasn't defined an e-commerce strategy. Go.com also hasn't articulated why former Infoseek shareholders should be jazzed about owning a tracking stock. The issues surrounding tracking shares such as limited shareholder rights and poor performance have been well noted on ZDII. (ZDNet is a tracking stock of Ziff Davis).
All is not lost, however. If Go.com can outline its strategy and start delivering the whole perception of the portal could change. "I could foresee an upgrade," said Brown. "There's a tremendous amount of potential."
And a tremendous amount of questions.