- guardian.co.uk, Thursday 30 September 1999 01.56 BST
On the off chance that there is someone left on the planet still unaware of the unjustifiably high valuations and accompanying hazards of internet shares, Merrill Lynch has come up with a set of guidelines for investing in the industry.
The Merrill report is perhaps the most comprehensive look yet at the growing European internet industry and it says Europe is an entirely different story than the US.
"We do not expect the thesis that what is happening in the Internet in Europe is merely a rerun of the US minus two years," analysts Peter Bradshaw and Henry Bodget said in the report.
For one thing, European internet services must operate in five different languages in order to reach 70% of the continent's audience. Furthermore, Europeans are unlikely to continue to access the internet from PC's alone: going forward, the mobile-toting Scandinavians may be more likely to link to the net via cell phones.
And internet shopping could be slower to take hold in Europe, where consumers rely less on credit cards than Americans. On balance, the analysts believe that Europe is close to, but has yet to generate a critical online mass to sustain the internet.
Still, Merrill believes there may be some decent prospects for investors. It is most keen on the early entrants to the market, along with companies that emphasise marketing, rather than technology. "Strong brands cut through the confusion created by low entry barriers," the report said.
Merrill also believes that companies that have concentrated on one business line have outperformed those with a handful of parallel operations. But most of all, the broker emphasises the value of strong management, particularly in the middle tiers.
Merrill provides somewhat more specific recommendations as part of its review. It maintains a buy rating on Scoot.com (unchanged at 38p yesterday); the former Freepages directory service which provides address and telephone information over the net. Merrill also recommends Photo-Me International (down 40p to £13.55), believing the shares could rise to £17.
