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Nasdaq Survivors

After the Great Dot-bust of 2000-01, here's the story of the survivors.

By Dipayan Bashiya

Just how long will they survive? That's the question many dotcom watchers were asking, once the great dream went bust - and Indian dotcom stocks, listed with so much fanfare on Nasdaq, went limp.

Guess what - Rediff and Sify are still happily listed (okay, well, just listed), and aren't doing all that badly either, thank you very much. In fact, things have positively started looking up in the past few months or so, going by the prices.

For a while, they looked doomed - fated to be thrown off America's largest online stock exchange for trading below the critical $1 mark. The scare was real. In June, Rediff moved from the Nasdaq National Market to Small Cap Market, though this was a voluntary move. The stock proceeded to hit a low of 21 cents. But then, fortunes changed, and Rediff soared to $4.78 in January 2003. Sify got a boost too, rising to $7.48.

What's the story?

Some analysts say that mere survival for a dotcom is a good enough sign that the business model has been re-sculpted to meet realities of the day (no cashing in of eyeball heaps at the advertising counter, for example). These dotcoms are not media ventures. Or at least not merely media ventures. Says David Appasamy, General Manager, Sify, "Now there is a lot of intrinsic value to our business model." Sify is no longer just a portal - defined as a grand gateway to cyberspace with bewildering array of Sunday Fair hyperlinks to choose from. It is, rather, something of an Enterprise Resource Planning (ERP) outpost, boasting of an 80-per cent share of India's VPN network market. Portal revenues are just 8 per cent of the total, and Sify has become more like its parent, Satyam Technologies, an integrated IT-solutions company.

Rediff, on the other hand, was an outgrowth of an ad agency - which explains why it is the much stronger brand name as far as consumer recall goes. This was India's pioneering portal, and has stuck it out as a premier online news-site and sundry-services resource, Yahoo-like. It helps, of course, that Rediff takes its journalistic role seriously enough to rivet the eyeballs that come with neural pathways to thoughtful brains ('content' is not some hurried add-on). Yet, it too is no longer just a portal.

Rediff is looking for revenue to B2C e-commerce, Net telephony and value added services for mobile operators (VASMO), which could hit big-time if the razzle-dazzle of 3-G mobility were to hit Indian shores.

As of now, Rediff is struggling with its financials. Its third quarter operating revenues have dropped by 47 per cent to $3.3 million, mainly on account of the poor performance of its phone card services, under Valucom. If the markets didn't react so badly to that news, it's because Rediff has reported significant gains in online orders (people have finally taken to Internet shopping). Also, the brand is coming to be seen as a long-term play. The predominant Internet news brand - independent of Big Media - must have a big future, goes the logic. The only catch is that Rediff will have to differentiate itself more sharply for this logic to hold good.

According to Saurabh Agrawal, Vice President, DSP Merrill Lynch, dotcoms that are close to break-even and have been able to establish leadership in niche areas "would have an opportunity to create significant shareholder value, going forward".

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