THE E-COMMERCE RACE: SPECIAL REPORTS - FRANKENBERG INTERVIEW

Guest Speaker: Robert J. Frankenberg, President, CEO - Encanto
Interviewer: Diane Watlov-Collins, President, MARKETINGWEB.COM
Date: March 31, 1999

Welcome to the MARKETINGWEB.COM Forum! The purpose of this Forum is to provide online discussion concerning the methods of Internet marketing.

**Marketingweb enters.

Marketingweb: The E-Commerce Race - Special Reports, March 30, 1999

Marketingweb: Robert J. Frankenberg, president and CEO of Encanto is our guest tonight. Mr. Frankenberg is well known to the IT industry. In addition to being the president and CEO of Encanto, he serves as a member on the boards of directors for America OnLine, Inc; Caere, Inc; Wall Data, and Secure Computing, Inc.

Marketingweb: Prior to joining Encanto in 1997, Mr. Frankenberg was the chairman, president and CEO of Novell, Inc.

**RFrankenberg enters.

**BMcDonald enters.

**Guest643 enters.

**emiliogt enters.

Marketingweb: I would like to welcome everyone to the Forum. Our interview will begin in just a few moments.

Marketingweb: Please hold your questions or responses until the interview with Mr. Frankenberg is completed. Many thanks! :)

Marketingweb: Thank you for joining us, Bob.

RFrankenberg: It's a real pleasure to be here!

Marketingweb: Are you ready to begin?

RFrankenberg: Let's get started.

Marketingweb: Tonight we would like to take a look at the Encanto strategy for small business e-commerce.

**Guest643 exits.

Marketingweb: The e-commerce solutions that are being designed for small business tend to fit into three major categories: template commerce; shrink-wrapped commerce; and custom commerce. Where would you place Encanto's solution?

**jbw66 enters.

**jbw66 exits.

RFrankenberg: Ours is a shrink wrap commerce solution, but more importantly, it's a complete Internet solution, not just e-commerce. e.go provides Internet access and email for a small office, the ability to create your own great looking web site, and complete e-commerce solution.

Marketingweb: So the small business owner can basically purchase your products off the shelf and plug them in?

**Guest678 enters.

RFrankenberg: Yes, and she can get started in less than an hour, but VARs can add a great deal to the solution as well.

Marketingweb: Value Added Resellers... what can they bring to the party?

RFrankenberg: No matter how easy we make the set up of a server there are still those who wish to have someone else handle the technical aspects.

**jbw66 enters.

Marketingweb: The Encanto solution offers a package deal to the small business owner. It appears to be the solution a business would choose if it wanted more control over its Internet presence than could be provided by the template solutions offered by portal sites. How scalable is the Encanto solution?

RFrankenberg: The e.go solution is highly scalable. Hosted sites offered by portals typically charge by the number of items in the store or the amount of storage.

**emiliogt enters.

RFrankenberg: E.go servers offer the ability to offer thousands (>5000) items and a Gigabyte of web pages at no additional charge.

Marketingweb: This would then eliminate having to start over again if you grow quickly.

RFrankenberg: That is a very important point - what small business doesn't hope to grow quickly by moving to the web?

RFrankenberg: Our software is entirely written in Java and we have demo'd it running on 6 different operating systems enabling our customers to grow even above the level our servers support.

Marketingweb: This is a design decison small businesses need to consider. Starting with an e-commerce system that cannot scale to your future needs can be very expensive when you have to scrap the original design because you have outgrown it.

Marketingweb: So, you are able to service the client in all stages of growth?

RFrankenberg: This is where our OEM partners will play a key role in the future.

RFrankenberg: Our servers handle up to about 2500 transactions per day and up to 100,000 hits, our customers will be able to grow beyond this with larger servers offered by our partners.

Marketingweb: It is our understanding that the Instant Connect feature of the Encanto solution is required. Is that true?

RFrankenberg: Yes it is true that Instant Connect is required to connect e.go

Marketingweb: Can you explain the benefits of this connection over dealing directly with a cable company offering broadband?

RFrankenberg: There are 3 major benefits

RFrankenberg: First std telephone lines are available to 100% of the small businesses while cable is available to only about 20 %

Marketingweb: Important point.

**emiliogt exits.

RFrankenberg: Second our network technology and caching makes that std phone line perform at about 70% the performance of a cable connection.

RFrankenberg: Third , the cost of connection is dramatically lower. Further the cable companies are not offering server connections yet as they have not figured out the caching.

Marketingweb: the client receives broadband speed over the phone line?

RFrankenberg: The client sees performance roughly equivalent to a T1 line (1.5mb)

RFrankenberg: Which is well into the broadband perf range.

Marketingweb: How about connection time allowed in the package. Any limits?

RFrankenberg: We charge $69.95 per month for unlimited usage.

RFrankenberg: This includes not only server access but web access for all the pcs connected to the server - up to 32

RFrankenberg: At $19.95 for each pc per month this is a great savings.

RFrankenberg: For anyone with more than 3 pcs

Marketingweb: Yes. I agree. How proprietary is the system? What other products in "shrink-wrapped" e-commerce are compatible?

RFrankenberg: We observe all Internet protocols, provide local phone access for over 90% of the US small businesses.

RFrankenberg: We provide full SET and SSL payment processing

RFrankenberg: Exchange and banner ads

RFrankenberg: Search engine registration

RFrankenberg: Software distribution and purchase

RFrankenberg: Mailing list access

RFrankenberg: Merchant account set up and credit card processing

Marketingweb: Encanto is really adding a lot to the package.

RFrankenberg: There are 15 other services in process that will soon be available.

Marketingweb: What position does Encanto seek in the small business e-commerce marketplace?

Marketingweb: Do your intentions include becoming a small business portal site?

RFrankenberg: The position we want to achieve is to be known as the best way for small businesses to be successful on the net

RFrankenberg: As to portals - our server is a portal for the small business owner, but I think you mean do we want to compete with Yahoo!, AOL, etc

Marketingweb: Yes

RFrankenberg: We are able to make the shopping experience much better for customers on the web and will compliment and want to work with large portals to enhance their users shopping experience with small businesses.

Marketingweb: So you would like to provide the mechanism...

Marketingweb: and let the portal provide the clients and added services?

RFrankenberg: Yes, exactly.

Marketingweb: That could work well.

RFrankenberg: We hope so! We make it possible to search all our customers catalogs for any item.

Marketingweb: Bob, our guests may wish to ask a few question.

Marketingweb: May I open the discussion to the floor?

BMcDonald: Bob, how many ego units have the * 800 * VARS sold?

RFrankenberg: We sold over 700 last year in 5 months of shipping. This year promises to be in the range of 15,000 sold via VAR.

BMcDonald: Cool!

sjbw66: How do you expect the federal lawsuit filed against you for trademark infringement to affect you ability to deliver e.go's?

RFrankenberg: We do not have a "federal" lawsuit against us. It is a lawsuit brought by an individual . It will have no effect

RFrankenberg: As it is groundless

jbw66: As I understand it, the lawsuit is in federal court and could have a serious effect on the name you're using.

Marketingweb: How extensive is your VAR training program?

RFrankenberg: Our VAR training is extensive. We offer 2 levels The first aimed at competence, the second at mastery.

Marketingweb: Who runs the program and what is their level of experience?

RFrankenberg: Our VAR training is done by 2 in house teams who travel contiuously on what we call the VOODOO lounge tour.

Marketingweb: If a company wanted to become a VAR, who would they contact?

RFrankenberg: Anyone interested in becoming a VAR can contact Jay Berryhill at jberryhill@encanto.com

BMcDonald: Your caching mechanism, isn't it much like having an ISP model

BMcDonald: If CobaltMicro has such a model

BMcDonald: why not switch?

RFrankenberg: The caching mechanism captures and can quickly deliver those pages that are most commonly accessed

RFrankenberg: Cobalt has no such mechanism.

RFrankenberg: The Cobalt caching server is a product that implements caching, not a service that makes use of it

BMcDonald: WRONG....Cobalt offers a rack mount at the ISP!

RFrankenberg: You are correct. You can pay to colocate a Cobalt Server at an ISP which is much more expensive than Instant connect.

jbw66: Why is a VAR necessary for a do it yourself solution?

RFrankenberg: A VAR isn't neccessary. But a VAR can add a great deal of value for those who do not wish to set up their our webstore.

Marketingweb: Many small businesses do not have their own tech teams...

Marketingweb: This is where a VAR can be helpful.

Marketingweb: Many small businesses like to concentrate on what they do best and would rely on a VAR to handle proper set up and implementation procedures for the server. If you have no technical expertise yet require something more than "template commerce," having someone who is very familiar with the "shrink-wrapped" system and who can "hold your hand" through the process is very appealing to some end users.

**jbw66 exits.

BMcDonald: What is the ego's sell in and through for 99?

RFrankenberg: We don't release that info

BMcDonald: When is Encanto going to be profitable?

RFrankenberg: If we achieve our sales goals we will be profitable next year

BMcDonald: great!

RFrankenberg: Thanks!

Marketingweb: We're almost out of time.

Marketingweb: Anything you want to add in the last few minutes, Bob?

RFrankenberg: I'd like to thank you for the opportunity to be with you tonight and really enjoyed the media as well as the "message."

Marketingweb: Who can people contact for further information on Encanto?

RFrankenberg: I can be reached at bfrank@encanto.com or 408-919-9540.

RFrankenberg: They can, of course, visit our website at www.encanto.com

Marketingweb: Thank you, Bob for your participation in our Forum. You're a great sport!

RFrankenberg: You're welcome!

Marketingweb: We extend our appreciation to all of those who joined us tonight.

Marketingweb: Good night to all!

**RFrankenberg exits.

**Marketingweb exits

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