Forum Archive Index - December 2000

[Phil Eriksen <phil@acepay.co.nz>]

not important wrote:
> 
> Hi
> Flicking though the press and saw sharemaket guide.
> What happened to national mail? this used to be around
> 130 then 70c not long ago and has dropped 22c this
> week to a low of 38. I know other ways of
> communicating such as email are killing mail but wow.
> Anyway, if email is taking over then this must be good
> for isp such as telecom and the whole
> telecommunications industry right? doesnt seem that
> way either! Comments?
> Confused cullen NI
> 
> Disc luckily hold no national mail

I think the main reason National Mail is struggling is that it is just
not much of a business, at least currently.  It is still losing a lot of
money, was probably floated too soon, and at too high a price for the
share price performance to be anything but bad.  Secondly, ISP's are not
National Mail's problem - NZ Post is.

If a small company decides to compete against a fat, lazy, state owned
organisation that is bumbling and fumbling, then the long term odds are
pretty good.  National Mail, however, has to contend with NZ Post, who
have economies of scale National Mail can only dream of, and expertise
and efficiency to the point that they have assisted postal services in
other countries, with some success I believe.  Therefore, I can't
imagine National Mail getting hordes of business from people sick of NZ
Post which leaves them with one other option - compete on price.  Trying
to compete on price when you don't have the experience, marketing power,
infrastructure or economies of scale does not sound like my idea of fun.

Email taking over is, at least currently, far from the main problem. 
Companies in zero growth (or declining) industries can actually be
excellent investments, IF they are the dominant provider, operate on
good margins, and are able to channel all excess cash back to
shareholders rather than egotistically chuck it into increasing the size
of an empire that is on borrowed time.  A declining industry is unlikely
to invite much regulation, inflated share prices, and most importantly,
hordes of competitors.  Which leads us to email...

Assuming email does one day "take over", that does not guarantee
investment returns.  An unfortunate fact of business is that a company
can be selling a product making X dollars and eventually, the product is
made obsolete by a new company making something that completely replaces
the original product.  This evolution does not guarantee that the new
company will make X dollars, or 1/2 X dollars, or any dollars at all. 
This is something that I believe has been blatantly obvious during the
"internet boom" but many people have chosen to ignore it.  Buying Amazon
shares believing that they will eventually bankrupt book retailers would
be a prime example.  Even if they did, it would not guarantee that they
would make the X dollars that the combined booksellers used to make. 
What counts is the business model, not the market share, and not the
economics of the old business that has been replaced by progress.  

When you also consider the vast number of companies rushing to the
"growth" business (ie ISP's) I think the best thing one can do with mail
(either email or the snail version) is sit back and watch the changes
the next few years bring.  Sitting back is boring (and more difficult
than it looks sometimes!) but with an area like this, it is by far my
preferred option.

Cheers,
Phil


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