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Online Extra: The BW Web 20: How're They Doin'?


BW's Web 20, founded in August, 2002, is designed to identify Internet companies that have profitable, real-world business models -- and don't rely on sleight of hand or rhetoric to prop up their stock prices. The portfolio is up 20% since it was last revised, on Apr. 15. Here's how the Web 20 members are performing, based on price, change since Apr. 15, and price-earning ratio. (All prices and p-e's are as of market close, Aug. 22, 2005. The p-e is based on forecast profits for 2005.)

aQuantive (AQNT)

Price: $16.74

Change Since 4/15: 58%

p-e: 41

The online ad agency is firing on all cylinders after initially struggling to digest 2004 acquisition Razorfish. Pretax earnings nearly doubled in the second quarter. The stock has climbed 90% since joining the Web 20 in August, 2004.

E*Trade (ET)

Price: $16.57

Change Since 4/15: 50%

p-e: 16

A takeover play for Ameritrade backfired, as AMTD bought rival TD Waterhouse instead. Second-quarter earnings from continuing operations were up 6% in a tough market, but the M&A misfire exposes ET's lack of scale. We're dropping it from the Web 20 to make room for Quality Systems, the portfolio's first bet on the e-health market.

Google (GOOG)

Price: $274.07

Change Since 4/15: 48%

p-e: 50

Search engine deluxe disappointed some with second-quarter earnings. But it's still the best -- if not the cheapest -- way to play online advertising. Up 224% since last August's IPO, but allowing for its projected growth it's no more expensive than the market.

Ctrip (CTRP)

Price: $54.11

Change Since 4/15: 45%

p-e: 37

The leading e-travel agency in China. With online-booking adoption still low and profits already solid, it has tons of room to improve on its 85% gain since joining the Web 20 in March, 2004. Second-quarter profits rose 80%.

Shopping.com (SHOP)

Price: $20.93

Change Since 4/15: 42%

p-e: N/A

First-quarter earnings report fell short of expectations, but the Web 20 got bailed out when eBay stepped up to buy the online price-comparison site for $21 a share. It's being replaced in the Web 20 by Netflix, which sells subscriptions to monthly DVD-rental plan.

Digital River (DRIV)

Price: $39.11

Change Since 4/15: 39%

p-e: 19

Raised 2005 earnings guidance 15% on July 27. Delivers software over the Net for companies like Symantec (SYMC) and H&R Block (HRB). Up 400% since joining index in October, 2002.

Amazon.com (AMZN)

Price: $43.77

Change Since 4/15: 33%

p-e: 67

Second-quarter results were a positive surprise -- the first in several quarters. Opinion is still sharply divided over the No. 1 e-tailer, though. Operating margins of 6%-plus are half what bulls say Amazon can make, but they have lurched around and not grown consistently.

eBay (EBAY)

Price: $39.15

Change Since 4/15: 22%

p-e: 48

Second-quarter results beat Street expectations by 3 cents a share, or 16%. But analysts burned by eBay's fourth-quarter miss, which led to 40% stock drop, want to see sustained improvement before declaring the auction giant recovered.

Blue Nile (NILE)

Price: $31.11

Change Since 4/15: 18%

p-e: 43

Leading online jewelry seller has stylishly fended off Amazon's incursion into its business by sticking to its knitting -- relatively expensive diamond jewelry. Second-quarter profits rose 50%. On tap: European expansion, and going way beyond engagement rings to include more necklaces and bracelets.

Shanda (SNDA)

Price: $34.81

Change Since 4/15: 18%

p-e: 21

Revenues up 88% in the second quarter, with profits up 58%. Runs interactive online games that users play in Web caf?s ubiquitous in Chinese cities. Profit margins top 40%. Joined Web 20 in April, up 16% since. Up from $11 a share at May, 2004 IPO.

Infosys (INFY)

Price: $69.63

Change Since 4/15: 15%

p-e: 31

Big India-based outsourcer rides one of the economy's most bankable megatrends, the globalization of technology work. Second-quarter profits rose 37%, but still missed expectations and prompted a sell-off.

Sina (SINA)

Price: $29.25

Change Since 4/15: 7%

p-e: 29

Chinese Web portal has been buffeted by problems with media-meddling regulators, contributing to 28% drop in second-quarter profits. Giving up on predicting Beijing bureaucracy, we drop Sina after 36% loss since joining the Web 20 in March, 2004.

Yahoo (YHOO)

Price: $33.20

Change Since 4/15: 2%

p-e: 23

Took a hit as second-quarter profits grew "only" 70%, excluding a one-time gain, disappointing those who thought Web portal would aChange beat Street expectations. But future is bright, with big growth in the pipeline as brand-building ads, rich media, and local advertising supplement search-engine profits.

Websense (WBSN)

Price: $48.10

Change Since 4/15: 0%

p-e: 32

Maker of software to let employers track workers' Web usage consistently posts bigger changes in profits than sales -- a sign of a model that works. A little pricey at 35 times this year's estimated profits, though, so watch out for any missteps.

Checkfree (CKFR)

Price: $37.89

Change Since 4/15: 0%

p-e: 23

Skepticism about growth and rising competition was setting in, but the Atlanta company that makes software for e-banking and online bill-paying had a big second quarter, with pro forma profits up 30%.

Provide Commerce (PRVD)

Price: $26.70

Change Since 4/15: -4%

p-e: 26

Runs flower site Proflowers.com. It stays despite weak recent performance because earnings have been O.K., rising 18% in the June quarter. Company guidance for fiscal 2006 calls for only modest profit growth, however. The dip follows a huge run: PRVD is still up 48% since joining the Web 20 in August, 2004.

Priceline (PCLN)

Price: $21.40

Change Since 4/15: -13%

p-e: 17

Priceline has stabilized its business by branching beyond its name-your-own-price roots to sell travel on more conventional retail terms as well. Potential buyout target, with Cendant (CD) the likeliest suitor. But we're dropping it from the Web 20 in favor of much larger Expedia.

ZipRealty (ZIPR)

Price: $12.59

Change Since 4/15: -13%

p-e: 31

Uses the Net to support a low-commission real estate brokerage model that's shaking up a $60 billion industry. Revenue rose 60% in the first half, to $44 million, but net income turned negative, thanks to a $4 million lawsuit settlement. Stock is down 14% since joining the Web 20 in April, but we're patient. The site is excellent, customer satisfaction is high, and the company's basic economics work.

InPhonic (INPC)

Price: $15.84

Change Since 4/15: -22%

p-e: 21

Runs Wirefly.com, a price-comparison site for cell phones and cellular plans. Also runs a prepaid wireless-phone service. First-quarter miss has stock down 23% since being added to the Web 20 in April. In second quarter, beat Wall Street estimates by a penny a share.

Infospace (INSP)

Price: $24.33

Change Since 4/15: -39%

p-e: 20

Two straight bad quarterly reports equals a ticket out of the Web 20 for Seattle-based Infospace, which sells ringtones and games to cell carriers and runs ad-supported services like online phone book Switchboard.com. Replaced by IAC/InterActiveCorp (IACI) whose businesses include search engine AskJeeves.

DATA: CBS MARKETWATCH, COMPANY REPORTS, THOMSON FIRST CALL.

* The Web 20 is composed of 100 shares of each stock, adjusted for splits after a company is added to the portfolio. Currently, the Web 20 includes 400 shares of eBay, 200 shares of Yahoo, and 100 shares of every other member.


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