Feeds

QXL: the epitome of ongoing confusion in the Internet economy

Shares up, then down; good model, poor model

  • alert
  • submit to reddit

Top 5 reasons to deploy VMware with Tegile

Online auction house QXL has released its Q1 results and in so doing demonstrated that even now no one has any idea of how business models will work on the Internet.

The troubled company, which has seen shares collapse from a high of 800p to 5.25p currently, released both good and bad news in its results. It appears as though it is managing to stem the huge cash burn that mark (or rather, marked) out the main Internet companies. Pre-tax loss fell to £10.7m, from £15.5m last year and loss per share fell from 4.5p to 1.5p.

It has also more than doubled its profit margin to 69 per cent from 32 per cent. This has come about from a new business model it introduced where it now acts as an agent, taking a commission from sales, rather than buying and selling the goods themselves.

With losses falling, £41 million left in the bank and QXL burning it at a rate of around £8 million a quarter, it looks as though it has found a way to come out the Internet economy unscathed. Hurrah! It has helped as well that it has got into bed with Microsoft. It signed a technology and marketing deal with the Beast of Redmond in May and is the first non-Microsoft company to sign up to its world domination Passport idea.

This viewpoint was backed up in early trading when its share price jumped up 4 per cent.

However, while its losses are getting smaller and the new model appears to be working towards profitability, QXL also announced that sales had halved year-on-year to £1.6 million from £3.1 million. Last quarter it made £1.9 million.

And so, somewhat belatedly, the market then changed its mind about QXL and the share price is now 12.5 per cent down.

Financial journalists can't decide either whether QXL has saved its bacon or simply extended its time on life support. The FT has come out in favour but then figures always hold too much sway in the pink investors' bible. Others, more wary of the Internet economy, look on like concerned relatives.

All which demonstrates a very interesting fact: despite the turmoil of the last few years, the boom and burst, the out-of-this-world business models, the collapse of big names, the huge losses made by established companies and on the other hand the failure of companies who believed that their same business models could actually be applied to the Internet, no one is still any the wiser as to what will make an Internet company successful and what won't.

It's still a case of winging it. Some say that dotcomers have become more sensible and thoughtful about their money but then that's only because they don't have a choice: there aren't any piles of cash to throw about any more. Spend what you have without getting into profit and it's game over.

So beware anyone telling you they have learnt the lessons of the dotcom bubble. We've yet to find a teacher, let alone a classroom. ®

Related Stories

QXL snuggles up to MS
QXL grows Q3 losses

Internet Security Threat Report 2014

More from The Register

next story
Facebook pays INFINITELY MORE UK corp tax than in 2012
Thanks for the £3k, Zuck. Doh! you're IN CREDIT. Guess not
DOUBLE BONK: Testy fanbois catch Apple Pay picking pockets
Users wail as tapcash transactions are duplicated
Happiness economics is bollocks. Oh, UK.gov just adopted it? Er ...
Opportunity doesn't knock; it costs us instead
YARR! Pirates walk the plank: DMCA magnets sink in Google results
Spaffing copyrighted stuff over the web? No search ranking for you
In the next four weeks, 100 people will decide the future of the web
While America tucks into Thanksgiving turkey, the world will be taking over the net
Microsoft EU warns: If you have ties to the US, Feds can get your data
European corps can't afford to get complacent while American Big Biz battles Uncle Sam
prev story

Whitepapers

Choosing cloud Backup services
Demystify how you can address your data protection needs in your small- to medium-sized business and select the best online backup service to meet your needs.
Forging a new future with identity relationship management
Learn about ForgeRock's next generation IRM platform and how it is designed to empower CEOS's and enterprises to engage with consumers.
Security for virtualized datacentres
Legacy security solutions are inefficient due to the architectural differences between physical and virtual environments.
Reg Reader Research: SaaS based Email and Office Productivity Tools
Read this Reg reader report which provides advice and guidance for SMBs towards the use of SaaS based email and Office productivity tools.
Storage capacity and performance optimization at Mizuno USA
Mizuno USA turn to Tegile storage technology to solve both their SAN and backup issues.