Micro-Cap Corner

Last December, when Global Market Research group Harris Interactive, Inc. (Nasdaq NM:HPOL) jumped from $l4 to $24 on the day of its IPO, the ground beneath Wall Street barely shook. Those were the days. In fact, Wall Street barely noticed when the stock subsequently got pummeled into oblivion–except maybe those who had instituted $30 price targets when the shares began to drift into the new year.

Good-natured ribbing aside, the pummellage does seem a bit excessive. Supporters of the stock point out that Internet revenue has skyrocketed since the IPO; though admittedly net earnings failed to keep pace. The obvious conclusion: putting what seems to be a neat concept into practice turned out to be much more expensive than most everyone anticipated. A few years back this would have seemed a mere quibble.

For their part, HPOL insiders have been gung-ho supporters of the shares since the IPO. And yes, a few of those buys, particularly those shares purchased at $14 in the initial offering, now look a bit ill advised. Even so, you’ve got to like their persistence. More recently, since March, four insiders acquired more than 1.4 million shares, mostly though the exercise of options. Chairman, CEO Gordon Black and Director G. Thomas Clarke picked up 10,000 and 2,500 shares on the open market, respectively.

Although the company’s insiders are clearly not among them, neither Harris Interactive nor the very concept of Internet polling is without its detractors. After all, there’s no denying that relying exclusively on subjects with computers and Internet access can create a demographic all its own. Moreover there is concern that the lure of the power and efficiency of the Internet will encourage the use of other-than-scientific research–an accusation Harris Interactive, heavily committed to the concept, adamantly denies.

Despite such drawbacks, the notion that market research should ultimately end up on the Internet seems so obvious that it’s difficult to view Harris Interactive as a concept stock. After all, according to a survey conducted by Inside Research, Internet polling by the major market-research firms tripled in 1999 and will more than double again this year. All of which comes as a surprise only to those who haven’t seen the cost efficiencies (and the incredible margins) associated with on-line polling.

And all of which makes Harris Interactive a good old-fashioned (new economy) execution story. The market is obviously there for the taking. To this end, HPOL has ramped up its personnel and facilities, as well as its sales force, and yet has a bit of cash on hand. The question, ultimately, is whether HPOL can ramp up its revenues quickly enough to keep pace with its outlays. Thus far, company insiders appear to be betting yes.

COPYRIGHT 2000 Thomson Financial Inc.

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