Guess I was lazier still.  Agree with your assessment, I just neglected to 
recalc your model in order to determine growth rates necessary to get cash 
flows high enough to justify $14 and $28.  31% and 40% growth rates are (I 
would argue) wildly unrealistic.  In addition, the capex numbers would 
(presumably) have to bump up substantially in order to get you there.  
Therefore, I would argue in the memo that the numbers don't add up for a $28 
price (though "irrational exuberance" may permit Netscape to pull it off).  
Unless other folks have comments on the model, I think you're good to go for 
the memo.  Am ready to look at it when you've got a draft.  Great job on the 
case.  Thanks.

Best,
Jeff



	JcjCal02@aol.com
	04/14/2001 11:16 PM
		 
		 To: Jeff.Dasovich@enron.com, JcjCal02@aol.com
		 cc: dwindham@uclink4.berkeley.edu, guinney@haas.berkeley.edu, 
JCJA@chevron.com, jjackson@haas.berkeley.edu, Mark_Guinney@watsonwyatt.com
		 Subject: Re: Netscape

Jeff,
You're obviously right about discounting cash flow.  I was getting a little 
lazy.  The capital exp in Exhibit 3 in the book is close to what you have in 
the model.  I agree about your working capital assumption.  I guess I'm not 
clear on your conclusion. The $3+ you calculated a share is based on 16% 
growth.  We are being asked to calculate what growth justifies $28/share.  I 
calculate 31% growth for $14/share and about 40% growth for $28 per share.  
Reality is their immediate growth is probably going to be higher than both 
numbers but would not be sustainable for 10 years.

Anyway while we bat this around, I've begun putting some bullshit into the 
memo.  I guess I vote we double the price.  The other IPO in Exhibit 6 
(especially Uunet) demonstrate how hot the high tech IPO market is.  IPOs are 
a lot about emotion and maybe a little about cash flow.  What's the down side 
if the offering doesn't sell well.  Netscape has a very hot business they 
should extract a high price for the potential gold mind they offer (this is 
my 1999 thinking, not 2000).  Comments?

Jimmy