Analysts Like Ask Jeeves’ Prospects

Analysts Like Ask Jeeves’ Prospects

 

Analysts Like Ask Jeeves’ Prospects

 


By Hal Plotkin
Silicon Valley Correspondent

Analysts expect Ask Jeeves Inc.’s {ASKJ} stock to move higher over the next 12 months, saying the company’s focus on natural-language processing will make it a strong survivor when the dust settles from the current dot-com sector shakeout.

Late last week, U. S. Bancorp Piper Jaffray analyst Safa Rashtchy put out a research note reiterating his “strong buy” rating and $51 12-month price target on Ask Jeeves’ stock.

“We believe that valuation remains attractive at less than 30 times our discounted 2003 earnings per share, or four times calendar year ‘01 revenues, [which represents a] nearly 50 percent discount to the peer group and the broader technology companies,” Rashtchy wrote.

Like many dot-com securities Ask Jeeves’ stock trades well off the high it hit late last year before worries about increased interest rates, profitability and valuation levels pummeled the sector.


Ask Jeeves 52-week stock performance

Analysts who follow the fast-changing online-search industry, however, say Ask Jeeves has what it takes to survive the current shakeout and thrive over the long term.

“I’m a big enthusiast on Ask Jeeves,” says Sue Feldman, director of the document and content-technologies research program at International Data Corp., based in Framingham, Mass. “I think natural language will be critical in terms of improving the interaction between people and computers.”

Emeryville, Calif.-based Ask Jeeves pioneered natural-language online searches. The company’s Web site allows surfers to ask their questions in plain English.

Ask Jeeves Web site

Ask Jeeves maintains its own database with answers to the most frequently asked questions and also supplies links to related information from other search engines.

More recently, Ask Jeeves has been expanding into corporate markets by delivering natural-language systems that firms such as Hewlett-Packard Co. {HWP} and Microsoft Corp. {MSFT} are using to answer online questions from customers.

The analysts say Ask Jeeves’ approach is even more powerful in corporate settings because the number of possible questions and answers is usually much more manageable, as compared with Ask Jeeves’ original mission of trying to answer questions about virtually anything under the sun.

“Ask Jeeves was very smart in the way they first trained consumers,” says Paul Hagen, senior analyst at Forrester Research, based in Cambridge, Mass. “They built an identity for themselves as a leader in this, which serves them very well in terms of attracting paying customers.”

Ask Jeeves’ familiar brand name, which is strongly associated with natural-language systems, makes it much easier for the company to expand the crucial corporate customer relationship management (CRM) side of its business, Hagen says.

There are more than two dozen CRM companies, including AnswerLogic Inc., eGain Communications Corp. {EGAN}, NativeMinds Inc. and Soliloquy Inc. that are all addressing the burgeoning need for easy-to-use natural-language processing systems, which are seen as a key ingredient in building customer-friendly Web sites. But analysts say few competitors can match the track record, experience or brand-name recognition that Ask Jeeves has amassed as a first mover.

“Ask Jeeves flew under the covers,” Hagen says. “But competing companies are now going to have a much-tougher time because Ask Jeeves has a lot more visibility in this.”

Analysts say that there are substantial benefits for online companies that use
natural-language systems of the sort championed by Ask Jeeves. For starters, unlike conventional search engines that record the words or phases used by consumers initiating a search, Ask Jeeves compiles a record of the actual questions consumers were hoping to answer. The data tell companies exactly what consumers want to know. Patterns in questions can be analyzed and resources immediately deployed to respond to whatever changes in direction may be reflected by real-life, real-time consumer inquiries.

“You get more than just an ability to answer questions,” Hagen says. “You also get a continuous feedback loop.”

In addition, consumers who visit Web sites that answer plain-English questions don’t have to learn the nuances of the menus or the syntax used by those sites.

“You have all those little problems that get in the way,” Feldman says. “With natural language, you don’t have to remember, ‘do I click this, or do I click that?’ You just ask the question and get the answer. It creates a much better interaction with the customer.”

“Ask Jeeves is the most well-known player as far a natural language goes,” agrees Lydia Loizides, an analyst with Jupiter Communications in New York. “I don’t think Ask Jeeves has received enough credit early on for the technology they have.”

The analysts add that Ask Jeeves’ early leadership in building natural-language systems will become even more important once larger numbers of consumers begin using wireless handheld devices to access the Internet. The tiny screens on those devices and the difficulty of inputting commands makes natural-language formats an obvious choice, particularly as speech-recognition technology improves.

“That’s our long-term hope for all this,” Feldman says.

Feldman says IDC will put out a report in a few weeks that will estimate the overall size of the market opportunity addressed by Ask Jeeves. The sizable numbers expected to be part of the estimate seem likely to increase investor interest in firms such as Ask Jeeves that are positioned to take advantage of those opportunities.

“We’re just starting to put a size on the market for enterprise portals, but we’re seeing natural-language processing as a major part of that,” Feldman adds.

Rashtchy thinks investors won’t have to wait too long to see Ask Jeeves develop more traction in the enterprise portal market.

“Many customers are relying heavily on Ask Jeeves solutions, both for CRM and for customer intellignce,” Rashtchy wrote in his report. “We believe several key Fortune 50 clients are likely to significantly increase their spending with Ask Jeeves.”

Rashtchy expects to see a slew of announcements, new products, additional marquee customers and new Ask Jeeves channel partners surface over the next few months.

Ask Jeeves’ Web site was the 18th-most-visited Web site during the third week of August, according to data from Nielsen/NetRatings. The performance put it slightly behind Amazon.com Inc. {AMZN}, which ranked 14th and ahead of other popular sites such as CNET Networks Inc. {CNET}, RealNetworks Inc. {RNWK} and iVillage Inc. {IVIL}.

On July 25, Ask Jeeves reported second-quarter revenue of $25.9 million, representing an 817 percent increase over the same period a year earlier and a 46 percent increase over the first quarter.

Ask Jeeves’ loss during the second quarter came in at 51 cents a share — not counting non-cash charges — 4 cents wider than the consensus analyst forecast compiled by First Call Corp.

List of Customer Relationship Management (CRM) Vendors

 

About the Author /

hplotkin@plotkin.com

<p>My published work since 1985 has focused mostly on public policy, technology, science, education and business. I’ve written more than 600 articles for a variety of magazines, journals and newspapers on these often interrelated subjects. The topics I have covered include analysis of progressive approaches to higher education, entrepreneurial trends, e-learning strategies, business management, open source software, alternative energy research and development, voting technologies, streaming media platforms, online electioneering, biotech research, patent and tax law reform, federal nanotechnology policies and tech stocks.</p>