Natureshop

So this internet thingee huh? Seems kinda cool. Quite like it actually.

One thing I find a bit funny sometimes is how big chains put their shops online. And make it all pretty and so on, and then go “man, internet is super cool. We don’t even need many people to run our online shop. We’re going to make squillions!”. (Squillions is a technical term used when people simultaneously get really excited and try and count both money and numbers of cars/girls(boys)/houses/boats/bling they think they will get because of said squillions. I haven’t researched in depth but my feeling is there is a definite inverse correlation between use of the word ‘squillions’ and actually obtaining aforementioned bling.

And then these shops makes sure that everything costs the consumer significantly more than what it would cost them in the shops themselves, normally due to massive ‘postage’ fees. In fact, some of these online shops charge so much in shipping that I fully expect it to be hand-delivered by Barack Obama and Jesus, hand in hand, singing “Can’t Buy Me Love”…

How do they not get the internet so badly? Amazon got it, everything cheaper. And easier. And a cool online shop in NZ does a similar thing. www.natureshop.co.nz sells icebreaker stuff. To be honest, they sell heaps more than icebreaker stuff, but I get so misty eyed over girding my loins in cast-off sheep hair, I haven’t looked at much else. I even have icebreaker pants. Which I thought sounded kinda naff, but… sigh… they’re great.

So they have cool stuff. But… they get the internet. Their sales are great, and shipping is free. And overnight. And returns are free. And customer service is awesome, just drop them an email. And you don’t have to create another !*$#& *#*! account if you don’t want to.

Now sure, being wizened old cynics like we are, we say “They might say shipping is free, but we’re paying for it somehow!”. And of course, wizened old cynics know a thing or two. I mean, we’ve been there before. And done that. And that other thing.But the prices are the same as in the retail shops (go for the specials page). And you get packages delivered to your door. And you get to unwrap them.

Thats the way internet shopping should be. Let me know if any other online shops do a good job of the internet. Disclaimer, I’ve spent quite a bit of money at natureshop, but get nothing for writing this. Dammit.

Natureshop

Mac versus PC (or apple versus dell)

A quick one here since I was curiously (enviously) looking at the new macbook pros.

I just did a quick comparison of the price of a reasonably fully specced macbook pro, and a maxxed out dell alienware, and a more standard dell XPS 15 on their respective US websites, and the comparison was interesting:

Alienware Apple XPS 15
CPU CPU:2.13ghz quad core i7 2.2ghz i7 (win) 2.2ghz i7
Screen res 1600×900 1680×1050 1920×1080
Memory 4gb 4gb 4gb
HDD 500gb Sata 2 7200rpm 500gb Sata 7200 500gb Sata 7200
Vid Card ati radeon 5730(1gb) ati 6750m(1gb) and onboard (win) nvidia 525m(1gb)
Cost $2524US $2349US 1480US

So, the macbook is cheaper than the alienware. But the XPS 15 is much cheaper than both.

From what I understand, the macbook is 1/2kg lighter than the XPS15, which is intended much more as a desktop replacement than an actual portable. But anyway, if you’re buying a macbook, you need to justify another $1000US.

That wouldn’t be too much of an issue for me I don’t think, since $1000US is probably about 1c per hour I spend on my mac. I’ve never been happier with a laptop than my mac (owned dells and toshibas previously) and I find it stupidly productive. The OS is worth probably another say $500 to me, because I like unix, and the level of ‘proper’! software support, and weight is pretty important as well. And the simple magnetic power cord has saved my ass more than … a lot, because I like to leave my mac dangling on the edge of tables, tipping precariously with the power cord rigged as a trip wire to trap the unwary. Most often me.

But there you have it, a mac versus dell comparison!

Disclaimer, happy (mostly) macbook user, and apple stockholder.

Mac versus PC (or apple versus dell)

Ecoya update

Ecoya have just released a news item, saying, unsurprisingly for a marketing company, just how fantastically they are doing. Or, since they’re a startup, how fantastically they’re losing money.

They’re predicting a loss of around 4 million, and, as predicted, have needed to raise more money. They state

“Taking into account current banking facilities, the company does not expect to have a requirement for further capital raising based on current forecasts.”

Which means that they had to go cap-in-hand to the bank and ask for money to pay the bills. But, they didn’t have to go out to the market to ask for more money to pay the bills. Yay. Smelly bankers instead of the unwashed masses like me. So no surprises there. The rest of the announcement is typical marketing/startup positivity, which is summarised as: “yay, we’re fabulous, blah, we *should* get more fabulous and wealthy if the planets align, yay us, ps, did I mention we’re awesome? pps., we’re kicking that Xero’s butt”

(actually that last PPS was mine… just kidding!).

The question then is, of course, should I buy shares? They’re predicting breakeven or profit in the next financial year, and revenues exceeding $20million, which would be an excellent result.

If thats true, Ecoya is a good speculative bet. See what I did there? I said “good”, which means “good”. And then “speculative” which means “good chance of losing all your money”. So Ecoya is a “good” “good chance of losing all your money”!

Hahahaha. Hilarious. I love this stock trading speak!

But the main thing is, Ecoya is a marketing company. They’re making SOS (same ol’ $#!t), but they seem to be marketing really well. And if you can market Vodka like the 42 below guys (which is essentially a pretty boring tasteless form of alcohol), they’re going to be like pigs in … er.. gooey smelly stuff marketing gooey smelly stuff.

So since I’m not a stock advisor, I have to make a call. And my call is, I think Ecoya will do well, assuming they still have facility to cover their expenses. They’re not super-expensive right now, you could buy the whole company for 30-40million.

But remember, you have a reasonable chance of losing the investment. Or doubling/tripling the investment. How much do you believe in their ability to market crap that everyone else is already making?

Ecoya update

Xero versus Ecoya – round 1!

Happy new year everyone!

To kick off the new year, I thought I would look at the 2 ‘glamour startup’ companies in the NZX, Ecoya and Xero. Xero as we know are a online financial software provider, while Ecoya sell ‘eco’ candles, body type stuff (obviously I’m a guy, but think smelly stuff for house).

Both companies are relatively new, with Xero (~2006) having a few years on its younger brother (2008). Ecoya obviously target a mass-consumer market (mainly cosmopolitan reading girls and the guys wanting to impress them), while Xero targets small/medium business (and accountants wanting to impress them!)

Neither has made any profit, with the March 2010 Annual reports showing revenue of 3.4 million for Xero, and 3.9 million for Ecoya. The Xero net loss for that period was $8.45 million, and Ecoyas was $2.35 million. So both companies are currently burning investors cash like a new years bonfire. In their latest (30 Sept ’10) interim reports, both indicate accelerating revenues (3.8million for Xero, 4.4million for Ecoya – note this is in 6 months), and increasing losses as expenses also ramp up, in Ecoyas case increased sales and marketing (no surprise) and admin (not sure why?) expenses. Xero are a bit less informative in their interim reports (which is funny for a financial software company! I find it funny. But my sense of humour is too ‘advanced’ for a lot of people).

So all up, both are looking… fairly startup-ish. Increasing revenues, increasing expenses etc.

Xero has dug a deeper hole in terms of current losses, but has a well-capitalised balance sheet. Ecoya has a bigger market (girls, and guys wanting to impress them!) but only 1.3million cash in the bank. Ecoya will definitely need some cash in the future, whereas Xero has enough to survive to their theoretical breakeven in 2011.

So thats the comparison in a nutshell. Xero, lots of cash on hand, high development expenses. Ecoya, pure consumer/brand play, huge market, not much cash.

On the face of it, the companies are pretty even. Xero is the more ‘glamourous’ stock at the moment, whereas Ecoya is flying very quiet. So its cash and celebrity that is the big difference between the companies.

So how much is Xero’s cash and celebrity valued at? In a startup, cash is worth much more than the face value. Cash in startup land = ability to survive another few months = not having to go back to market or raise debt = much less risk. If we do a quick market cap comparison, Xeros cash and celebrity are valued at approximately… $235 million! (thats the difference in market caps between Xero (270million) and Ecoya (33million).

Which… is quite a lot. Justified? Hmm. Ecoya will have to raise debt or go back to the market for more cash (unless Trilogy is an undisclosed cash machine). So there is a lot more ‘current’ risk associated with Ecoya. However, I would suggest that their model is easier, in that the high-end consumer products market is well proven, and the Ecoya board have a lot of experience (via 42below and the other board members) getting into that market.

So, although a much riskier current play, it looks like on pure revenue and model terms, Ecoya might be a reasonable bet. Oh yeah, if they can survive another year. Xero? At 10x Ecoyas valuation, the market sure does love Xero.

I love Xero too, but not so much at this valuation. I will be keeping a close eye on Ecoya, particularly with regards to cash flow over the next 6 months.

2011 is going to be an exciting/interesting year for both companies!

Xero versus Ecoya – round 1!

Xero – a great business?

The Xero share price has been rocketing up recently, making people a fair whack of paper money. Which is great, and why we invest in stocks right?

Right?

Well. Actually, not really. I know, the end goal is to make money. But I would submit that the “why” we invest is to actually own great companies at good valuations. Which end up making us lots of money, because they are great companies.

Why this definition? Well, many people in the stock market define winners as stocks where the price has gone up and up. As Xero has in recent months. Just like a rocketship after take off. So if you had bought at $0.75, and sold now at $2.68, you would have made a nice chunk of cash. But this is not how I invest (for better or worse!).

So Xero is a rocketship after take-off. My interest is whether Xero has enough gas to get out of orbit, and thats what is not clear to me now. I just can’t tell whether Xero is going to be a best-of-breed business, or a very successful company, or one of the also-rans in a highly competitive marketplace, or go bankrupt, or whether a big player will buy them out.

All of these scenarios are still on the table. My valuation of Xero portrays Xero as a ‘very successful’ company, with almost 2 million subscribers by 2018, and a ‘now’ shareprice around $3.75. Now, valuations can be wildly inaccurate, but they are a good ‘line-in-the-sand’ if you’re looking to work out whether a company will hit orbit. With the shareprice currently at $2.68… theres just not enough ‘up’ for me for all the risks still on the table.

So I’m watching Xero with interest. I suspect a buy-out might be the best outcome for Xero (and shareholders), but only time will tell.

Xero – a great business?