DomainNameWire and eWeek have recently been speculating about a Google acquisition of Godaddy, the world's largest domain name registrar.
Reasons cited include the numerous domain (and sometimes search) related patents which Godaddy has been filing lately, an existing partnership between Google and Godaddy under the Google Aps for Your Domain package, and the vast amount of domain related data Google would gain and be able to potentially leverage to improve search.
When asked about a potential union, Godaddy CEO Bob Parsons told eWeek, "I have no comment on that, but I'd like to."
While a potential acquisition still seems to be complete speculation, Bob Parons' lack of comment may be telling. He is typically outspoken about everything. Many have pointed to his inability to keep quiet as the reason why Godaddy withdrew their IPO in late 2006. On his blog, Parsons referred to the one month quiet period as "suffocating."
Friday, August 31, 2007
Thursday, August 30, 2007
Domain name related stocks suffer through August
Domain name related stocks have had a rough August. During the month to date, each of the publicly traded companies with significant exposure to the space suffered double digit percentage declines.
Here is a summary of the month to date performance for Marchex (MCHX), Tucows (TCX), Interseach Global (IGO), and Communicate.com (CMNN.OB).
Marchex has a portfolio of over 200,000 domain names. They are currently using the domain names as part of platform for targeted advertising and search marketing. Previous post is here.
Tucows is a wholesale domain registrar as well as the owner of a large portfolio of domain names, notably including the world's most extensive collection of surname domain names. Previous post is here.
Intersearch Global is the owner of domain names such as banks.com, look.com, and irs.com. They have used these domain names to create industry specific destination portals.
Communicate.com is the owner of domain names such as boxing.com, perfume.com, and importers.com. They are shifting towards developing their domain names into retail or business websites. Previous post is here.
The dismal performance of these stocks is ironic against the backdrop of recent headline grabbing domain name related news. Dictionary.com recently sold for $100 million. The company built around Business.com sold for $360 million. The company built around Creditcards.com recently filed for an IPO to raise up to $115 million.
So what's the deal?
Are the current slate of publicly traded domain name related companies not using their assets to the fullest potential? Or is the market not recognizing the underlying value of the domain names held by each company?
Disclosure: I am long TCX
Here is a summary of the month to date performance for Marchex (MCHX), Tucows (TCX), Interseach Global (IGO), and Communicate.com (CMNN.OB).
| Stock | Aug 1 | Aug 30 | Change |
| MCHX | 13.44 | 8.94 | -33.50% |
| TCX | 1.24 | 0.97 | -21.80% |
| IGO | 2.6 | 1.65 | -13.20% |
| CMNN.OB | 2.6 | 2.24 | -13.80% |
Marchex has a portfolio of over 200,000 domain names. They are currently using the domain names as part of platform for targeted advertising and search marketing. Previous post is here.
Tucows is a wholesale domain registrar as well as the owner of a large portfolio of domain names, notably including the world's most extensive collection of surname domain names. Previous post is here.
Intersearch Global is the owner of domain names such as banks.com, look.com, and irs.com. They have used these domain names to create industry specific destination portals.
Communicate.com is the owner of domain names such as boxing.com, perfume.com, and importers.com. They are shifting towards developing their domain names into retail or business websites. Previous post is here.
The dismal performance of these stocks is ironic against the backdrop of recent headline grabbing domain name related news. Dictionary.com recently sold for $100 million. The company built around Business.com sold for $360 million. The company built around Creditcards.com recently filed for an IPO to raise up to $115 million.
So what's the deal?
Are the current slate of publicly traded domain name related companies not using their assets to the fullest potential? Or is the market not recognizing the underlying value of the domain names held by each company?
Disclosure: I am long TCX
Wednesday, August 29, 2007
eBay needs your listings
There has been much chatter around the internet that eBay's listing numbers have been significantly declining.
A few week ago, I mentioned that eBay was actually starting to pay for new user referrals. This was the first time eBay needed to resort to such tactics.
Today they unveiled a promotion for no listing fees all month. In the past, eBay has had promotions for no listing fees for a single day. These single day promotions came infrequently and typically on days when no one wanted to list anyway. 30 days is a long time for no listing fees.
It looks like eBay is really pulling out all the stops to try to prop up their listing numbers.
A few week ago, I mentioned that eBay was actually starting to pay for new user referrals. This was the first time eBay needed to resort to such tactics.
Today they unveiled a promotion for no listing fees all month. In the past, eBay has had promotions for no listing fees for a single day. These single day promotions came infrequently and typically on days when no one wanted to list anyway. 30 days is a long time for no listing fees.
It looks like eBay is really pulling out all the stops to try to prop up their listing numbers.
Tuesday, August 28, 2007
Earthlink - Everything new is old again?
Today Earthlink revealed the first phase of their anticipated corporate restructuring. The company will eliminate 900 jobs and close offices in several locations. Facility exit and restructuring costs are estimated at $60 to $70 million. The company will also boost the share repurchase program by $200 million.
These are the first steps taken by new CEO Rolla Huff, who is expected to get Earthlink back on track. In the press release today, he stated that additional steps can be expected in the coming weeks and months. Many are expecting that his next moves will be to exit Earthlink's money losing ventures in municipal wifi and Helio, leaving the company with only their profitable but diminishing ISP business.
The new CEO has already made comments about the muni wifi business not providing an acceptable return, dragged his feet on San Francisco, and today Chicago scrapped their wifi network plan. Based on this, it seems likely that Earthlink will continue to head for the exit on muni wifi.
Things look different on the Helio front. As recently as last month, Earthlink invested another $30 million in Helio, also committed to invest up to $100 million more. The Helio CEO Sky Dayton is the founder of Earthlink and a current board member. Exiting Helio seems complicated and contradictory to the recent investment.
So what lies ahead for Earthlink? Are they going to stake their future on Helio and hope that it doesn't go the way of Amp'd Mobile? Are they going to become a lean cash generating ISP and funnel the money to shareholders through dividends and share buybacks? Or is Rolla Huff prepping the company for a sale?
These are the first steps taken by new CEO Rolla Huff, who is expected to get Earthlink back on track. In the press release today, he stated that additional steps can be expected in the coming weeks and months. Many are expecting that his next moves will be to exit Earthlink's money losing ventures in municipal wifi and Helio, leaving the company with only their profitable but diminishing ISP business.
The new CEO has already made comments about the muni wifi business not providing an acceptable return, dragged his feet on San Francisco, and today Chicago scrapped their wifi network plan. Based on this, it seems likely that Earthlink will continue to head for the exit on muni wifi.
Things look different on the Helio front. As recently as last month, Earthlink invested another $30 million in Helio, also committed to invest up to $100 million more. The Helio CEO Sky Dayton is the founder of Earthlink and a current board member. Exiting Helio seems complicated and contradictory to the recent investment.
So what lies ahead for Earthlink? Are they going to stake their future on Helio and hope that it doesn't go the way of Amp'd Mobile? Are they going to become a lean cash generating ISP and funnel the money to shareholders through dividends and share buybacks? Or is Rolla Huff prepping the company for a sale?
Monday, August 27, 2007
Why EMC is having so much trouble breaking $20?
Everyone loves EMC (EMC). So why can't the stock break $20?
EMC investors have watched shares of VMware (VMW) basically go up in a straight line since the IPO, implying ever greater value for EMC's 85.6% stake. EMC investors have heard countless recommendations to buy EMC as the "smart" way to invest in VMware. So what gives?
Taking a look at the open interest for $20 strike price options might shed some light. The open interest for calls far outweighs the open interest for puts across the board. For the next few months the numbers stack up like this:
Sept 07 - 37,706 calls to 4,211 puts
Oct 07 - 57,507 calls to 2,894 puts
Jan 08 - 116,508 calls to 4,249 puts
In the most extreme cases, greater than 24 out of every 25 people are betting that EMC will be higher than $20 in the coming months. While this is certainly backed up by the soaring valuation of VMware, countless analysts, financial writers, Cramer, and basic mathematics- this huge open call interest is creating a barrier to further price increases.
Two weeks ago, I don't think anyone could have dreamed of seeing VMW above $70 with EMC still lingering below $20.
How much longer can this keep up?
EMC investors have watched shares of VMware (VMW) basically go up in a straight line since the IPO, implying ever greater value for EMC's 85.6% stake. EMC investors have heard countless recommendations to buy EMC as the "smart" way to invest in VMware. So what gives?
Taking a look at the open interest for $20 strike price options might shed some light. The open interest for calls far outweighs the open interest for puts across the board. For the next few months the numbers stack up like this:
Sept 07 - 37,706 calls to 4,211 puts
Oct 07 - 57,507 calls to 2,894 puts
Jan 08 - 116,508 calls to 4,249 puts
In the most extreme cases, greater than 24 out of every 25 people are betting that EMC will be higher than $20 in the coming months. While this is certainly backed up by the soaring valuation of VMware, countless analysts, financial writers, Cramer, and basic mathematics- this huge open call interest is creating a barrier to further price increases.
Two weeks ago, I don't think anyone could have dreamed of seeing VMW above $70 with EMC still lingering below $20.
How much longer can this keep up?
Friday, August 24, 2007
AT&T - I miss Ed Whitacre
AT&T just doesn't seem the same without Ed Whitacre at the helm.
Ed Whitacre was the CEO of Southwestern Bell Corporation/ SBC Communicatoins/ "the new AT&T" from 1995 to June 2007. He orchestrated a string of acquisitions that turned the smallest baby bell into the largest telecommunications company in the world. By the end of his tenure, AT&T was the largest US provider of local and long distance telephone service, the largest US provider of broadband internet access, the largest US wireless provider based on subscribers, the largest US directory publisher, and one of the largest providers of IP based telecom services for businesses. In addition, AT&T has one of the world's most powerful internet backbone networks, a leading internet directory service, and an emerging businesses in television. AT&T was most recently named the Company of the Year by Forbes magazine.
Over the past few years, Ed Whitacre kept things interesting for shareholders. From the bidding war for AT&T wireless, to the acquisition of the remnants of the old AT&T and subsequent rebranding and renaming of the company, to the eventual Bellsouth merger that squeaked through antitrust authorities.
He kept things controversial and unusual. From his push to bring TV service to telecom customers, to statements about requiring internet companies pay for broadband pipe access which sparked a debate about network neutrality, to his $158.5 million dollar retirement package.
He was interesting, intriguing, and uncharacteristic of a telecom executive. He supposedly did not have a computer in his office or use email. He enjoyed ranch life and one of his favorite activities was using his tractor to move things and dig holes.
His replacement Randall Stephenson is in the unfortunate position of following an icon. Since he took over in June, AT&T's stock price has been basically flat, even through the much anticipated iPhone launch. He hasn't made any splashy statements or deals and probably won't any time soon. He has stated that AT&T will not make any more acquisitions for "the time being." He is supposedly tech savvy and loquacious.
Yawn.
I miss Ed Whitacre.
Disclosure: I am long AT&T
Ed Whitacre was the CEO of Southwestern Bell Corporation/ SBC Communicatoins/ "the new AT&T" from 1995 to June 2007. He orchestrated a string of acquisitions that turned the smallest baby bell into the largest telecommunications company in the world. By the end of his tenure, AT&T was the largest US provider of local and long distance telephone service, the largest US provider of broadband internet access, the largest US wireless provider based on subscribers, the largest US directory publisher, and one of the largest providers of IP based telecom services for businesses. In addition, AT&T has one of the world's most powerful internet backbone networks, a leading internet directory service, and an emerging businesses in television. AT&T was most recently named the Company of the Year by Forbes magazine.
Over the past few years, Ed Whitacre kept things interesting for shareholders. From the bidding war for AT&T wireless, to the acquisition of the remnants of the old AT&T and subsequent rebranding and renaming of the company, to the eventual Bellsouth merger that squeaked through antitrust authorities.
He kept things controversial and unusual. From his push to bring TV service to telecom customers, to statements about requiring internet companies pay for broadband pipe access which sparked a debate about network neutrality, to his $158.5 million dollar retirement package.
He was interesting, intriguing, and uncharacteristic of a telecom executive. He supposedly did not have a computer in his office or use email. He enjoyed ranch life and one of his favorite activities was using his tractor to move things and dig holes.
His replacement Randall Stephenson is in the unfortunate position of following an icon. Since he took over in June, AT&T's stock price has been basically flat, even through the much anticipated iPhone launch. He hasn't made any splashy statements or deals and probably won't any time soon. He has stated that AT&T will not make any more acquisitions for "the time being." He is supposedly tech savvy and loquacious.
Yawn.
I miss Ed Whitacre.
Disclosure: I am long AT&T
Thursday, August 23, 2007
Vonage - Finding interesting ways to resume growth
Vonage (VG) has been been working hard to get their growth back on track, following a much publicized patent battle with Verizon and significant cuts to their marketing budget. Recently after reporting second quarter results, CEO Jeff Citron assured investors that they would be getting back on track to resume growth.
A lawsuit filed yesterday by now bankrupt, former competitor Sunrocket shows that Vonage may have been going to some extraordinary means to resume growth. According to the lawsuit, Vonage illegally obtained the list of former customers from a third party after unsuccessfully trying to purchase the list directly from Sunrocket.
They were of course trying to capture some of Sunrocket's 200,000 displaced voip subscribers. Now they face "injunctive and declatory relief" which would prevent Vonage from using the list and possibly require them to pay Sunrocket.
A lawsuit filed yesterday by now bankrupt, former competitor Sunrocket shows that Vonage may have been going to some extraordinary means to resume growth. According to the lawsuit, Vonage illegally obtained the list of former customers from a third party after unsuccessfully trying to purchase the list directly from Sunrocket.
They were of course trying to capture some of Sunrocket's 200,000 displaced voip subscribers. Now they face "injunctive and declatory relief" which would prevent Vonage from using the list and possibly require them to pay Sunrocket.
Google - YouTube ads are not Adwords
Yesterday Google finally unveiled the advertising format for YouTube videos. Ads will appear 15 seconds after a user starts viewing a video as an overlay on the bottom fifth of the screen. Users can click on the overlay to watch a full form video advertisement. According to the NYTimes, Google will charge a flat $20 per 1,000 ad impressions. The unveiling of a substantial monetization strategy for YouTube comes 10 months after Google's acquisition of the site for $1.65 billion.
Putting aside the potential hurdles of user dissatisfaction and patent disputes, is this really a big deal? Some have drawn comparisons to Adwords, which Google used to monetize its search engine and derive revenue from endless third party websites across the internet.
For many reasons, Google's video ads in their current form are not Adwords.
Adwords took off because it expanded to become an advertising distribution channel for the entire internet. Not only were ads placed alongside search results, they were also eventually distributed across a vast content network. Any website owner looking to monetize traffic could easily inject the tiny Google ads into their web pages.
In the case of the new video ads, it seems doubtful that Google will be able to create a similar video advertising distribution channel across all internet video content. Because of the copyright issues which have always plagued internet video, Google has to be very careful about which videos include ads. Currently, they are only running the ads on a small group of established YouTube content providers to ensure that ads do not appear on copyrighted clips.
Adwords was embraced by advertisers because the system brought efficiency and accountability to internet advertising. Advertisers could bid for specific keywords and were only charged if a user clicked on the ad to visit the advertiser's website. Because this allowed advertisers to better target audiences and easily track results, they were comfortable bidding ever-increasing amounts for each click.
Google's video ads in their current form do not seem to carry the same efficiency and accountability. Video content cannot be targeted based on specific keywords. At best, video is segregated into channels of similar themed content. Advertisers have less of an opportunity to directly target users interested in a specific product. Currently, Google is selling video ads on a cost per impression basis, as opposed to a pay per click model. That means that it will be far more difficult for ad rates to escalate the way that was possible with Adwords.
Google enjoyed a relatively low cost structure for Adwords, particularly for ads served across its content network. Content providers who included ads on their website, generally paid the costs hosting and promoting their websites. Google only needed to sell and place the ads through their automated system.
In the case of video ads, Google pays the hosting and bandwidth costs associated with showing the videos since they all originate from YouTube. Google must also pay the costs associated with showing all of the videos outside its tiny group of established content providers which do not carry video ads. At this time, it seems like the vast majority of videos on YouTube will fall into this category.
While there will be many ways to expand the tiny stream of revenue from internet video ads, it certainly will never be like the gravy train that is Adwords.
Putting aside the potential hurdles of user dissatisfaction and patent disputes, is this really a big deal? Some have drawn comparisons to Adwords, which Google used to monetize its search engine and derive revenue from endless third party websites across the internet.
For many reasons, Google's video ads in their current form are not Adwords.
Adwords took off because it expanded to become an advertising distribution channel for the entire internet. Not only were ads placed alongside search results, they were also eventually distributed across a vast content network. Any website owner looking to monetize traffic could easily inject the tiny Google ads into their web pages.
In the case of the new video ads, it seems doubtful that Google will be able to create a similar video advertising distribution channel across all internet video content. Because of the copyright issues which have always plagued internet video, Google has to be very careful about which videos include ads. Currently, they are only running the ads on a small group of established YouTube content providers to ensure that ads do not appear on copyrighted clips.
Adwords was embraced by advertisers because the system brought efficiency and accountability to internet advertising. Advertisers could bid for specific keywords and were only charged if a user clicked on the ad to visit the advertiser's website. Because this allowed advertisers to better target audiences and easily track results, they were comfortable bidding ever-increasing amounts for each click.
Google's video ads in their current form do not seem to carry the same efficiency and accountability. Video content cannot be targeted based on specific keywords. At best, video is segregated into channels of similar themed content. Advertisers have less of an opportunity to directly target users interested in a specific product. Currently, Google is selling video ads on a cost per impression basis, as opposed to a pay per click model. That means that it will be far more difficult for ad rates to escalate the way that was possible with Adwords.
Google enjoyed a relatively low cost structure for Adwords, particularly for ads served across its content network. Content providers who included ads on their website, generally paid the costs hosting and promoting their websites. Google only needed to sell and place the ads through their automated system.
In the case of video ads, Google pays the hosting and bandwidth costs associated with showing the videos since they all originate from YouTube. Google must also pay the costs associated with showing all of the videos outside its tiny group of established content providers which do not carry video ads. At this time, it seems like the vast majority of videos on YouTube will fall into this category.
While there will be many ways to expand the tiny stream of revenue from internet video ads, it certainly will never be like the gravy train that is Adwords.
Countrywide - details on Bank of America investment
Last night, Countrywide announced a $2 Billion dollar investment from Bank of America.
BofA invested $2 billion in the form of non-voting preferred stock yielding 7.25%. The preferred securities can be converted into common stock at a price of $18 per share. Shares resulting from conversion are subject to an 18 month trading restriction. If the full amount of preferred shares were converted, BofA would own about 16% of Countrywide.
Further details were available today from an SEC filing.
Cash dividends are payable quarterly and are cumulative. If dividend payments are not made for 6 quarters, BofA has the right to elect two directors to Countrywide's Board until dividends have been paid for two consecutive quarters.
Other customary terms included pre-emptive rights and anti-dilution adjustments on any future issuances of common or preferred stock. Upon conversion of their preferred stock, BofA would also receive payment of any cumulative and unpaid dividends. BofA is subject to standstill restrictions prohibiting them from acquiring additional ownership of Countrywide. Countrywide is required to offer BofA the right to match terms of any third party proposal regarding sale of the company.
BofA invested $2 billion in the form of non-voting preferred stock yielding 7.25%. The preferred securities can be converted into common stock at a price of $18 per share. Shares resulting from conversion are subject to an 18 month trading restriction. If the full amount of preferred shares were converted, BofA would own about 16% of Countrywide.
Further details were available today from an SEC filing.
Cash dividends are payable quarterly and are cumulative. If dividend payments are not made for 6 quarters, BofA has the right to elect two directors to Countrywide's Board until dividends have been paid for two consecutive quarters.
Other customary terms included pre-emptive rights and anti-dilution adjustments on any future issuances of common or preferred stock. Upon conversion of their preferred stock, BofA would also receive payment of any cumulative and unpaid dividends. BofA is subject to standstill restrictions prohibiting them from acquiring additional ownership of Countrywide. Countrywide is required to offer BofA the right to match terms of any third party proposal regarding sale of the company.
Tuesday, August 21, 2007
VMware - Buys domain name vmw.com
Just spotted on the home page of Sedo under Recent Sales. (Screen shot for after the home page updates.) VMware has purchased vmw.com for $20,000.
Domain registration information now reflects VMware, Inc.
VMware got away with a bargain on this one.
Domain registration information now reflects VMware, Inc.
VMware got away with a bargain on this one.
Monday, August 20, 2007
Announcement - stocks.us website
I would like to announce the launch of the latest version of my website stocks.us
Stocks.us lets you know what's happening now in the US stock market. You can visit the home page to get an instant snapshot of the top stocks in the news with links to related stories and blog entries. Information is updated every 15 minutes so you can check back throughout the day to stay up to date on breaking news.
The latest version of the site has expanded blog coverage and some improvements to the organization and layout.
Stocks.us lets you know what's happening now in the US stock market. You can visit the home page to get an instant snapshot of the top stocks in the news with links to related stories and blog entries. Information is updated every 15 minutes so you can check back throughout the day to stay up to date on breaking news.
The latest version of the site has expanded blog coverage and some improvements to the organization and layout.
Friday, August 17, 2007
eBay needs your friends
I remembered seeing an article a few days ago about eBay's (EBAY) listing problems. This evening, I received an email from eBay offering to pay up to $50 if I could get my friends to sign up and start listing items. This will help me to share the fun of listing on eBay.
While offers like this always come and go on the internet, this is the first time I have seen eBay have to resort to this tactic. Could it be that the everyone has already signed up for eBay, cleaned out their attic/basement, and moved on?
While offers like this always come and go on the internet, this is the first time I have seen eBay have to resort to this tactic. Could it be that the everyone has already signed up for eBay, cleaned out their attic/basement, and moved on?
Heelys - A well timed IPO
In a previous entry I had taken a look at the performance of Heelys (HLYS) compared to other "shoe fad" stocks. Since that time, shares took a 50% haircut and then some.
As it turns out, the popularity of their wheeled shoes may have exactly coincided with their IPO. Take a look at the search volume from Google Trends and then take a look at when shares first started trading. Even though sales are still growing, it looks like all the buzz has been played out.
Looking at the search volume other shoe fad stocks, Ugg Boots are highly seasonal. Crocs are still gaining popularity.
As it turns out, the popularity of their wheeled shoes may have exactly coincided with their IPO. Take a look at the search volume from Google Trends and then take a look at when shares first started trading. Even though sales are still growing, it looks like all the buzz has been played out.Looking at the search volume other shoe fad stocks, Ugg Boots are highly seasonal. Crocs are still gaining popularity.
Thursday, August 16, 2007
Countrywide - No bottom yet
Yesterday Countrywide (CFC) was downgraded from Buy to Sell by a Merrill Lynch analyst, citing liquidity concerns. As early as last Friday he had reiterated his Buy rating in a research note, stating that the news appears to "sensationalize" the company's liquidity problems.
At least a few people questioned the timing of the downgrade and the abrupt reversal, as the Buy rating had already stood through a 50% decline. Some people even questioned whether the sell rating could actually signal the capitulation everyone has been waiting for and possibly mark a "near-term bottom" for Countrywide. There's some conventional wisdom that by the time analysts are comfortable slapping a sell rating on a stock, the worst news is probably already reflected in the stock price.
Unfortunately that was not the case this time. This morning Countrywide provided more bad news and found room for a new bottom. The company tapped its credit lines for $11.5 billion to supplement its liquidity position. Shares of Countrywide were recently down more than 10% in early trading.
At least a few people questioned the timing of the downgrade and the abrupt reversal, as the Buy rating had already stood through a 50% decline. Some people even questioned whether the sell rating could actually signal the capitulation everyone has been waiting for and possibly mark a "near-term bottom" for Countrywide. There's some conventional wisdom that by the time analysts are comfortable slapping a sell rating on a stock, the worst news is probably already reflected in the stock price.
Unfortunately that was not the case this time. This morning Countrywide provided more bad news and found room for a new bottom. The company tapped its credit lines for $11.5 billion to supplement its liquidity position. Shares of Countrywide were recently down more than 10% in early trading.
Wednesday, August 15, 2007
Imax - Is bad math what's really troubling Imax?
Imax (IMAX) shares took another beating late last week after reporting second quarter results. A revenue decline of 28% helped swing the company to a $4.57 million loss. The main contributor to the revenue shortfall was a 32% decline in revenue from new theater installations.
The headline numbers look disappointing, but are shifts in installation options and accounting what's causing the disappointment?
Imax recognized revenue from 4 theater installations in the current year compared to 9 in the prior year. However, they also performed 3 theater installations under joint venture agreements compared to zero in the prior quarter. Under joint venture agreements, Imax generally supplies equipment and installations for free in exchange for a cut of the box office revenue. Imax also performed one more theater installation that had to be classified as an operating lease. Since Imax will be required to perform a digital upgrade at a later date, the majority of the revenue from these types of installations must be deferred until the digital upgrade takes place.
So is the "apples to apples" number for theater installations really 8 compared to 9?
The shift in Imax theater installation options and the changes in accounting will continue to put a damper on reported results. Imax continues to state that 2007 is a "transitional year" for the company. Do analysts and investors know how to make sense of the numbers until the company makes it to the other side?
The headline numbers look disappointing, but are shifts in installation options and accounting what's causing the disappointment?
Imax recognized revenue from 4 theater installations in the current year compared to 9 in the prior year. However, they also performed 3 theater installations under joint venture agreements compared to zero in the prior quarter. Under joint venture agreements, Imax generally supplies equipment and installations for free in exchange for a cut of the box office revenue. Imax also performed one more theater installation that had to be classified as an operating lease. Since Imax will be required to perform a digital upgrade at a later date, the majority of the revenue from these types of installations must be deferred until the digital upgrade takes place.
So is the "apples to apples" number for theater installations really 8 compared to 9?
The shift in Imax theater installation options and the changes in accounting will continue to put a damper on reported results. Imax continues to state that 2007 is a "transitional year" for the company. Do analysts and investors know how to make sense of the numbers until the company makes it to the other side?
Tuesday, August 14, 2007
Lion Inc - Top web property trapped inside
Lion Inc (LINN.OB) provides technology and business solutions for the mortgage industry. The company wasn't exactly doing great even while the mortgage industry was booming. Now that things have turned, the company seems to be just a few quarters away from running out of cash to fund its operations. The company's current market capitalization is a scant $6.5 million.
Lion's main distinction is the top web property mortgage101.com trapped inside of it. Mortgage101.com has the current honor of being the first non-sponsored search engine result when searching for "mortgage" in both Google and Yahoo. This search engine position beats out larger and generally more popular mortgage destinations like bankrate.com from Bankrate Inc. (RATE) and mortgage.com from ABN AMRO Holding (ABN).
The prospects for their non-Mortgage101.com related business are clearly shaky, since they depend on selling value added service to mortgage lenders. In their most recent quarterly results, overall revenue declined 21% to $3,537,000. Mortgage101.com revenues rose 8% to $388,000.
Why is this strategically valuable web property trapped inside of this tiny company? With the amount of money spent on search engine optimization and sponsored listings, mortgage101.com seems like low hanging fruit. Will someone try to acquire Mortgage101.com? Will Lion Inc finally figure out how to leverage the property more effectively?
Lion's main distinction is the top web property mortgage101.com trapped inside of it. Mortgage101.com has the current honor of being the first non-sponsored search engine result when searching for "mortgage" in both Google and Yahoo. This search engine position beats out larger and generally more popular mortgage destinations like bankrate.com from Bankrate Inc. (RATE) and mortgage.com from ABN AMRO Holding (ABN).
The prospects for their non-Mortgage101.com related business are clearly shaky, since they depend on selling value added service to mortgage lenders. In their most recent quarterly results, overall revenue declined 21% to $3,537,000. Mortgage101.com revenues rose 8% to $388,000.
Why is this strategically valuable web property trapped inside of this tiny company? With the amount of money spent on search engine optimization and sponsored listings, mortgage101.com seems like low hanging fruit. Will someone try to acquire Mortgage101.com? Will Lion Inc finally figure out how to leverage the property more effectively?
EMC, VMware - VMware up, EMC down Part 2
The hotly anticipated VMware (VMW) IPO opened today at $52, a jump of nearly 80% from its $29 offer price. Oddly, EMC (EMC) was trading down more than 2%, putting shares once again below $19.
This is a bit of deja vu for many who expected a strong opening for VMware to directly benefit EMC's share price since they retain an 87% stake in the company.
VMware's opening price values the company at roughly $20 billion, making EMC's stake worth roughly $17 billion. EMC's entire maket cap is actually $39 billion. Does that mean EMC's operations without VMware are worth only $22 billion? That would make for some odd numbers. VMware was responsible for less than 10% of EMC's revenues in the most recent quarter, but apparently accounts for 44% of the market cap?
This is a bit of deja vu for many who expected a strong opening for VMware to directly benefit EMC's share price since they retain an 87% stake in the company.
VMware's opening price values the company at roughly $20 billion, making EMC's stake worth roughly $17 billion. EMC's entire maket cap is actually $39 billion. Does that mean EMC's operations without VMware are worth only $22 billion? That would make for some odd numbers. VMware was responsible for less than 10% of EMC's revenues in the most recent quarter, but apparently accounts for 44% of the market cap?
Monday, August 13, 2007
United Online - Time to undiversify
United Online's (UNTD) primary business has traditionally been selling internet access. With proliferation of cheap broadband and packaged internet service, revenue from this business was in decline.
In 2004, the company undertook a diversification plan to transform from a pure internet service provider into a diversified internet media company. Their primary means of diversification was through acquisition. The main acquisitions were Classmates.com, an online social networking site founded in 1995, and MyPoints.com, a loyalty marketing service. These sites created a growing media and advertising revenue stream to offset their declining internet access revenues.
Today United Online reversed course by filing for an IPO for Classmates Media, which will include both classmates.com and mypoints.com. Following the IPO, United Online will still retain control interest and majority voting power.
The timing is opportunistic. After the ascension of MySpace and recent numbers being thrown around for Facebook of up to $10 billion, maybe the company is willing to undiversify a bit while the price is right.
In 2004, the company undertook a diversification plan to transform from a pure internet service provider into a diversified internet media company. Their primary means of diversification was through acquisition. The main acquisitions were Classmates.com, an online social networking site founded in 1995, and MyPoints.com, a loyalty marketing service. These sites created a growing media and advertising revenue stream to offset their declining internet access revenues.
Today United Online reversed course by filing for an IPO for Classmates Media, which will include both classmates.com and mypoints.com. Following the IPO, United Online will still retain control interest and majority voting power.
The timing is opportunistic. After the ascension of MySpace and recent numbers being thrown around for Facebook of up to $10 billion, maybe the company is willing to undiversify a bit while the price is right.
VMware - EMC can't hardly wait
EMC (EMC) was up over 7% today in anticipation of tomorrow's VMware (VMW) IPO. EMC closed at 19.05 making up for some of the ground lost last week. EMC is now within striking range of its 52 week high of 19.84.
EMC experienced heavy call volume with about 11 times as many calls traded vs puts. Particularly active were August 19 calls. These options expire at the end of the week, so the premium is basically "VMware anticipation premium."
VMware's has already been referred to as the "new Google." It has been referred to as the hottest IPO of the summer, and even the "hottest IPO of the year."
Although the price range for the IPO has been set at $27 to $29 per share, predictions about Vmware's price when shares begin trading have been as high as $45 or even $60 from Cramer.
EMC experienced heavy call volume with about 11 times as many calls traded vs puts. Particularly active were August 19 calls. These options expire at the end of the week, so the premium is basically "VMware anticipation premium."
VMware's has already been referred to as the "new Google." It has been referred to as the hottest IPO of the summer, and even the "hottest IPO of the year."
Although the price range for the IPO has been set at $27 to $29 per share, predictions about Vmware's price when shares begin trading have been as high as $45 or even $60 from Cramer.
Sunday, August 12, 2007
Movie Gallery, Blockbuster, Netflix - Race to the bottom
The main players in the movie rental business have had a rough time this year. Year to date, Movie Gallery (MOVI), Blockbuster (BBI), and Netflix (NFLX) are down 89%, 22%, and 32% respectively. Collectively, the three companies have lost over $900 million in market cap.
Movie Gallery chose to focus on in-store movie rentals and never pursued online rentals or downloads. In 2005, they bought out larger competitor Hollywood Video saddling them with $1 billion in debt. The company has watched their revenue dwindle in the face of competition from online rentals and struggled under their heavy debt load. Their most recent quarterly filing cites liquidity problems and doubts about continuing as a going concern.
Blockbuster was late to the online movie rental business, but caught up quickly by emulating Netflix's service with an added benefit. Subscribers could return movies to physical stores instead of waiting a few days to send and receive by mail. They recently acquired Movielink, allowing them to match Netflix's movie download feature. Although Blockbuster has made great progress in competing with Netflix, this hasn't translated into profitability. In fact, the shift to online subscriptions has pushed up costs and helped to swing the company to a quarterly loss.
Netflix was a pioneer in online movie rentals, early to define the space and defend their turf. Back in 2005, Netflix actually beat Walmart. Nowadays, competition from Blockbuster is proving much more challenging. In the most recent quarter, Netflix reported their first ever net subscriber loss. During the same period Blockbuster added 600,000 subscribers. Netflix is currently profitable, but recently announced price cuts on their most popular subscriptions. This will impair their margins and further escalate the battle with Blockbuster.
The dark horse in the movie rental space might be movie downloads. Do we really need to send plastic discs back and forth to watch movies? In the future, the concept may seem silly. While both Blockbuster and Netflix have invested in download features, both seem to be devoting most of their attention to winning the DVD rental-by-mail market. The area seems ripe for a new upstart to enter and once again upend the way we get our movies.
Movie Gallery chose to focus on in-store movie rentals and never pursued online rentals or downloads. In 2005, they bought out larger competitor Hollywood Video saddling them with $1 billion in debt. The company has watched their revenue dwindle in the face of competition from online rentals and struggled under their heavy debt load. Their most recent quarterly filing cites liquidity problems and doubts about continuing as a going concern.
Blockbuster was late to the online movie rental business, but caught up quickly by emulating Netflix's service with an added benefit. Subscribers could return movies to physical stores instead of waiting a few days to send and receive by mail. They recently acquired Movielink, allowing them to match Netflix's movie download feature. Although Blockbuster has made great progress in competing with Netflix, this hasn't translated into profitability. In fact, the shift to online subscriptions has pushed up costs and helped to swing the company to a quarterly loss.
Netflix was a pioneer in online movie rentals, early to define the space and defend their turf. Back in 2005, Netflix actually beat Walmart. Nowadays, competition from Blockbuster is proving much more challenging. In the most recent quarter, Netflix reported their first ever net subscriber loss. During the same period Blockbuster added 600,000 subscribers. Netflix is currently profitable, but recently announced price cuts on their most popular subscriptions. This will impair their margins and further escalate the battle with Blockbuster.
The dark horse in the movie rental space might be movie downloads. Do we really need to send plastic discs back and forth to watch movies? In the future, the concept may seem silly. While both Blockbuster and Netflix have invested in download features, both seem to be devoting most of their attention to winning the DVD rental-by-mail market. The area seems ripe for a new upstart to enter and once again upend the way we get our movies.
Saturday, August 11, 2007
Marchex - What do you do with 200,000 domain names?
Marchex (MCHX) is a company with great assets that keeps coming up short on performance. Shares recently fell to a 3 year low after reporting results which missed expectations and issuing a disappointing outlook for the next quarter.
Marchex owns a portfolio of over 200,000 domain names. This includes a large number of zip code domain names like 90210.com and domains with semantic or type in value like debts.com or newyorkdoctors.com. They were one of the earliest public companies to invest in domain names for the purpose of monetizing direct navigation traffic. In late 2004, they purchased a portfolio of over 100,000 domain names from Name Development Ltd. for $164.2 million.
Initially, most of their domain names were populated with generic pay per click advertising landing pages. They have recently moved towards turning their locally targeted domain names into basic websites with local content. Is this the right move?
There are three basic options for monetizing domain names: 1.) sell them like assets; 2.) monetize direct navigation traffic with generic pay per click landers; or 3.) build websites with some kind of revenue model.
Marchex's most recent move seems like a half-hearted attempted at the third option. Their developed websites basically still seem generic since they all follow the same cookie-cutter format, and the content just seems like yellowpages.com information with some extra tweaks. At the end of the day, the websites don't bring anything unique to the table.
By trying to come up with a monetization strategy for a huge batch of their domains at once, I think Marchex is overlooking a greater opportunity. In focusing on locally targeted domain names, they have basically devoted their efforts to creating websites for the long tail of their domain channel. (How many people type in 06483.com?) What they should be doing is focusing on their best domain names and trying to create individualized websites with unique value propositions and the potential for becoming popular destinations.
In other words, instead of creating 100,000 bad websites, create 100 good websites.
Marchex owns a portfolio of over 200,000 domain names. This includes a large number of zip code domain names like 90210.com and domains with semantic or type in value like debts.com or newyorkdoctors.com. They were one of the earliest public companies to invest in domain names for the purpose of monetizing direct navigation traffic. In late 2004, they purchased a portfolio of over 100,000 domain names from Name Development Ltd. for $164.2 million.
Initially, most of their domain names were populated with generic pay per click advertising landing pages. They have recently moved towards turning their locally targeted domain names into basic websites with local content. Is this the right move?
There are three basic options for monetizing domain names: 1.) sell them like assets; 2.) monetize direct navigation traffic with generic pay per click landers; or 3.) build websites with some kind of revenue model.
Marchex's most recent move seems like a half-hearted attempted at the third option. Their developed websites basically still seem generic since they all follow the same cookie-cutter format, and the content just seems like yellowpages.com information with some extra tweaks. At the end of the day, the websites don't bring anything unique to the table.
By trying to come up with a monetization strategy for a huge batch of their domains at once, I think Marchex is overlooking a greater opportunity. In focusing on locally targeted domain names, they have basically devoted their efforts to creating websites for the long tail of their domain channel. (How many people type in 06483.com?) What they should be doing is focusing on their best domain names and trying to create individualized websites with unique value propositions and the potential for becoming popular destinations.
In other words, instead of creating 100,000 bad websites, create 100 good websites.
Friday, August 10, 2007
IndyMac - Analyst wants to be a superhero
Earlier this week the first bottom-caller for IndyMac Bank (IMB) surfaced. A Roth Capital analyst upgraded IndyMac from "sell" to "hold" citing a "more attractive" valuation after the sell-off and stating that concerns that the company may not be able to continue are "overblown."
Shares briefly rallied as much as 10%, but since then most of these gains have evaporated.
IndyMac has had a rough time lately, with its share price down more than 50% year to date. Concerns over subprime loans spread to "Alt-A" loans, and the demise of AHM added more fuel to the fire.
While IndyMac probably won't face the liquidity crisis that put AHM under, I think it is to still early to be calling bottom. Even if things are not as bad as they seem, the market will keep coming up with increasingly dismal worst case scenarios. At this point, it is not prudent to jump into the stock until the cycle has run its course.
Uglychart.com anoints their daily all-time low and all-time high lists with a quote which seems appropriate here: “It is one of the great paradoxes of the stock market that what seems too high usually goes higher and what seems too low usually goes lower.” - William O’Neil
Shares briefly rallied as much as 10%, but since then most of these gains have evaporated.
IndyMac has had a rough time lately, with its share price down more than 50% year to date. Concerns over subprime loans spread to "Alt-A" loans, and the demise of AHM added more fuel to the fire.
While IndyMac probably won't face the liquidity crisis that put AHM under, I think it is to still early to be calling bottom. Even if things are not as bad as they seem, the market will keep coming up with increasingly dismal worst case scenarios. At this point, it is not prudent to jump into the stock until the cycle has run its course.
Uglychart.com anoints their daily all-time low and all-time high lists with a quote which seems appropriate here: “It is one of the great paradoxes of the stock market that what seems too high usually goes higher and what seems too low usually goes lower.” - William O’Neil
EMC - VMware up, EMC down
EMC (EMC) recently raised the price range for next week's IPO of VMware (VMW) from $23 - $25 to $27 - $29 per share.
Many have attributed EMC's rise over the past 6 months to "unlocked" value attributable to the company's 90% stake of VMware, which they will continue to control after the IPO. Oddly, the price of EMC has declined over the past week. Of course, this may have been due to the overall weak market.
Is the most optimistic valuation for VMware already priced into EMC? The question remains and next week will be telling.
Many have attributed EMC's rise over the past 6 months to "unlocked" value attributable to the company's 90% stake of VMware, which they will continue to control after the IPO. Oddly, the price of EMC has declined over the past week. Of course, this may have been due to the overall weak market.
Is the most optimistic valuation for VMware already priced into EMC? The question remains and next week will be telling.
Thursday, August 9, 2007
Heelys - The wheels come off
Shares of Heelys dropped nearly 50% after warning of a weak second half in their second quarter earnings report.
For the second quarter, net sales increased 140% and net income increased 205% for 45 cents per share.
Looking ahead, the company "noted that it is experiencing challenges at retail related primarily to an over-inventoried position of product at many of the Company's domestic accounts which will have a significant adverse affect on its fourth quarter 2007 results. Based on these factors, the Company now expects net sales and net income growth of 10% - 15% in 2007 versus 2006."
Analysts were looking for 45% growth.
Previous coverage of Heelys.
For the second quarter, net sales increased 140% and net income increased 205% for 45 cents per share.
Looking ahead, the company "noted that it is experiencing challenges at retail related primarily to an over-inventoried position of product at many of the Company's domestic accounts which will have a significant adverse affect on its fourth quarter 2007 results. Based on these factors, the Company now expects net sales and net income growth of 10% - 15% in 2007 versus 2006."
Analysts were looking for 45% growth.
Previous coverage of Heelys.
Wednesday, August 8, 2007
Spectrum Brands- Frankenstein company disassembles itself
Spectrum Brands (SPC) is a consumer products company put together over the years through serial acquisitions. Today their products include batteries, lawn and garden, shaving, and pet food.
The anticipated "synergies" between these unrelated offerings haven't been working out.
After all of the acquisitions, the company has roughly $2.5 billion in sales and $2.5 billion in debt. The market cap stands at $262 million. Their most recent quarterly results included $30.6 million of restructuring costs and $41.2 million of interest expense, which contributed to an overall $7.4 million loss.
In an effort to stabilize, the company is attempting to sell it lawn and garden division. Shares rallied to $5, but are not within sight of the peak share price of $40 reached 2 and a half years ago. Buying businesses for a premium and selling at a discount unfortunately doesn't add much shareholder value.
The anticipated "synergies" between these unrelated offerings haven't been working out.
After all of the acquisitions, the company has roughly $2.5 billion in sales and $2.5 billion in debt. The market cap stands at $262 million. Their most recent quarterly results included $30.6 million of restructuring costs and $41.2 million of interest expense, which contributed to an overall $7.4 million loss.
In an effort to stabilize, the company is attempting to sell it lawn and garden division. Shares rallied to $5, but are not within sight of the peak share price of $40 reached 2 and a half years ago. Buying businesses for a premium and selling at a discount unfortunately doesn't add much shareholder value.
Tuesday, August 7, 2007
Tucows - The cow is half empty
This morning Tucows (TCX) reported record revenue and record adjusted net income for the second quarter. So why is the stock trading down more than 15%?
Looking more closely at the numbers, things were less encouraging. Revenues included $3 million from a one time sale of 2,500 domain names. Without this sale, earnings would have been essentially flat with year ago numbers. This quarter's revenue and earnings were weighed down by a decline in new domain name registrations due to m&a activity within their customer base as well as the loss of major customer Registerfly. Google ad revenues were also weaker.
Separately Tucows announced a price reduction for wholesale domain registrations.
On the conference call, CEO Elliot Noss seemed to accentuate the negative, even for some of the positive aspects of the quarter. He stressed that the $3 million domain name sale was "atypical" and suggested that the overall level of domain name sales for the next two years might be less than this. He described the wholesale domain registration price reduction as "an expensive choice to make" and would not quantify a financial impact.
Here are the counterpoints:
The $3 million domain name sale which was described as "atypical" could be better described as "demonstrative" of the value of Tucows' extensive domain name portfolio. Tucows owns tens of thousands of domain names including the Netidentity portfolio of surname domain names. Tucows carries the entire surname portfolio on their balance sheet as a $12 million intangible asset. (This seems undervalued compared to some recently announced big ticket domain name sales.) The value of their premium and expired domain name portfolio is not reflected on their books at all, since there was no cost associated with acquiring the domain names. These portfolios together represent significant, latent, unrecognized value.
Second, the domain registration price reduction has been a long time coming. While the number of total domain registrations under Tucows management continues to grow, their market share has been dropping. Tucows has already been giving price reductions to some of their higher volume customers in order to stay competitive. The number of actual registrations which will be impacted by the price reduction was not stated. The price reduction will help Tucows maintain and possibly increase their market share in the competitive domain name space. The revenue impact of the price decrease should be somewhat offset by the impending Verisign registry fee increase coming in October. The margin impact may also be offset by higher sales volumes as new registrants take advantage of the lower pricing.
Bottom line, this quarter's results were disappointing, but the stock price reaction is overdone.
Disclosure: I am long Tucows.
Looking more closely at the numbers, things were less encouraging. Revenues included $3 million from a one time sale of 2,500 domain names. Without this sale, earnings would have been essentially flat with year ago numbers. This quarter's revenue and earnings were weighed down by a decline in new domain name registrations due to m&a activity within their customer base as well as the loss of major customer Registerfly. Google ad revenues were also weaker.
Separately Tucows announced a price reduction for wholesale domain registrations.
On the conference call, CEO Elliot Noss seemed to accentuate the negative, even for some of the positive aspects of the quarter. He stressed that the $3 million domain name sale was "atypical" and suggested that the overall level of domain name sales for the next two years might be less than this. He described the wholesale domain registration price reduction as "an expensive choice to make" and would not quantify a financial impact.
Here are the counterpoints:
The $3 million domain name sale which was described as "atypical" could be better described as "demonstrative" of the value of Tucows' extensive domain name portfolio. Tucows owns tens of thousands of domain names including the Netidentity portfolio of surname domain names. Tucows carries the entire surname portfolio on their balance sheet as a $12 million intangible asset. (This seems undervalued compared to some recently announced big ticket domain name sales.) The value of their premium and expired domain name portfolio is not reflected on their books at all, since there was no cost associated with acquiring the domain names. These portfolios together represent significant, latent, unrecognized value.
Second, the domain registration price reduction has been a long time coming. While the number of total domain registrations under Tucows management continues to grow, their market share has been dropping. Tucows has already been giving price reductions to some of their higher volume customers in order to stay competitive. The number of actual registrations which will be impacted by the price reduction was not stated. The price reduction will help Tucows maintain and possibly increase their market share in the competitive domain name space. The revenue impact of the price decrease should be somewhat offset by the impending Verisign registry fee increase coming in October. The margin impact may also be offset by higher sales volumes as new registrants take advantage of the lower pricing.
Bottom line, this quarter's results were disappointing, but the stock price reaction is overdone.
Disclosure: I am long Tucows.
Earthlink - Where's my Wifi?
Late last week, San Francisco delayed voting on the proposed Google-Earthlink municipal wireless network following comments from Earthlink's CEO about Earthlink's desire to offer the service under the current terms. The Earthlink CEO is quoted, "The Wi-Fi [wireless] business as currently constituted will not provide an acceptable return."
Earthlink's legacy business is providing internet access, traditionally through dial up connections, and in recent years through broadband connections. This legacy business has been under attack by cheap packaged broadband internet connections from telephone and cable companies. In the most recent quarter, Earthlink lost net 177,000 subscribers.
The company has been struggling to find a way to fill the void, spending on two initiatives- municipal wifi and MVNO wireless carrier Helio joint venture with SK Telekom. In the most recent quarter, their share of Helio's loss was $41 million. The company has recently committed to invest up to another $100 million in the money losing venture. The other popular MVNO Amp'd Mobile recently declared bankruptcy.
With their legacy business dwindling, and their two initiatives far from ready to start providing returns, the future is not looking bright for Earthlink.
Earthlink's legacy business is providing internet access, traditionally through dial up connections, and in recent years through broadband connections. This legacy business has been under attack by cheap packaged broadband internet connections from telephone and cable companies. In the most recent quarter, Earthlink lost net 177,000 subscribers.
The company has been struggling to find a way to fill the void, spending on two initiatives- municipal wifi and MVNO wireless carrier Helio joint venture with SK Telekom. In the most recent quarter, their share of Helio's loss was $41 million. The company has recently committed to invest up to another $100 million in the money losing venture. The other popular MVNO Amp'd Mobile recently declared bankruptcy.
With their legacy business dwindling, and their two initiatives far from ready to start providing returns, the future is not looking bright for Earthlink.
Monday, August 6, 2007
EMC - VMware is coming
Only 8 more days until the IPO of EMC's (EMC) VMware unit.
A nice in-depth analysis from Seeking Alpha.
Note the non-cash dividend payable to EMC of $800M. This is more than EMC paid for the entire company in 2004. Following the IPO, EMC will still retain 90% ownership of VMware.
A nice in-depth analysis from Seeking Alpha.
Note the non-cash dividend payable to EMC of $800M. This is more than EMC paid for the entire company in 2004. Following the IPO, EMC will still retain 90% ownership of VMware.
Saturday, August 4, 2007
IndyMac and Bear Stearns - Cramer didn't like that
In an email to employees, IndyMac (IMB) CEO described the secondary mortgage market as "panicked and illiquid." He explained the necessity for changes to pricing and underwriting guidelines, but ensured the liquidity of the company.
He joins Bear Stearns (BSC) executives in a round of public comments about the state of the mortgage situation. Bear Stearns CFO referred to the current situation as worse than the dot com bubble.
Cramer flipped out (video link) and called such negative public commentary "shameful."
He joins Bear Stearns (BSC) executives in a round of public comments about the state of the mortgage situation. Bear Stearns CFO referred to the current situation as worse than the dot com bubble.
Cramer flipped out (video link) and called such negative public commentary "shameful."
Answers.com - Why they need dictionary.com
A few weeks back Answers.com (ANSW) announced their intention to purchase dictionary.com for $100M cash, even though the purchase price was in excess of their market cap. Their market cap has significantly declined since that announcement, now falling below $60M.
What happened?
Following the announcement, they filed to sell up to $140M of new shares, debt, and warrants to fund the purchase. This week, they announced that traffic to their websites had dropped as much as 28% following an algorithm update by Google (GOOG).
It's becoming apparent that the purchase of dictionary.com may have primarily been an asset purchase of a great domain name with direct navigation traffic, thereby reducing their dependence on Google's search results traffic. But with the company's market cap dwindling, and their existing business deteriorating, can they still get the deal done?
What happened?
Following the announcement, they filed to sell up to $140M of new shares, debt, and warrants to fund the purchase. This week, they announced that traffic to their websites had dropped as much as 28% following an algorithm update by Google (GOOG).
It's becoming apparent that the purchase of dictionary.com may have primarily been an asset purchase of a great domain name with direct navigation traffic, thereby reducing their dependence on Google's search results traffic. But with the company's market cap dwindling, and their existing business deteriorating, can they still get the deal done?
Gateway - Not Apple
Computer maker Gateway (GTW) reported earnings this week. Although they swung to a profit, sales declined by 8%. The revenue decline was driven by lower direct and corporate business sales, offset by an increase in their retail division.
This is a stark contrast to Apple's computer sales, which were up a surprising 33%.
Many people have been holding out for a Gateway buyout, however this may not soon materialize. Goldman Sachs recently commented that the chances of a buyout are diminishing.
This is a stark contrast to Apple's computer sales, which were up a surprising 33%.
Many people have been holding out for a Gateway buyout, however this may not soon materialize. Goldman Sachs recently commented that the chances of a buyout are diminishing.
Wednesday, August 1, 2007
International Fight League - Keeps beating up shareholders
Today IFL (IFLI.OB) announced $12.7 million in financing. They sold 25,330,000 shares of stock for an aggregate price of $12,665,000. The new investors also receive 12,665,000 warrants to purchase shares at $1.05.
The sales price equates to 50 cents per share without even considering the warrants. At the start of today IFL's shares were trading at 95 cents. Shares closed at 85 cents before news of the placement was released.
Why sell shares for a little more than half of the market price? Because they have been burning through cash at a frightening pace. In the quarter ended March 31, they burned through nearly $7 million of cash, leaving only $9 million left on their balance sheet. By now, that $9 million must be nearly vaporized.
This hasn't been the first time IFL sold shares for far below the market price, diluting and devaluing the shares of their existing investors. Shortly after the company went public, they sold shares for under $2, while the market price was over $8.
The sales price equates to 50 cents per share without even considering the warrants. At the start of today IFL's shares were trading at 95 cents. Shares closed at 85 cents before news of the placement was released.
Why sell shares for a little more than half of the market price? Because they have been burning through cash at a frightening pace. In the quarter ended March 31, they burned through nearly $7 million of cash, leaving only $9 million left on their balance sheet. By now, that $9 million must be nearly vaporized.
This hasn't been the first time IFL sold shares for far below the market price, diluting and devaluing the shares of their existing investors. Shortly after the company went public, they sold shares for under $2, while the market price was over $8.
IndyMac - Party cancelled on account of AHM
Yesterday IndyMac (IMB) shares briefly rallied following their earnings release. The company stated their intention to continue paying the hefty 50 cent per quarter dividend as long as things don't "get a lot worse" and gave some rosy comments that troublesome mortgages were moving through their financials "very quickly."
In the morning shares traded as high as $26.10. In the afternoon, after AHM spoiled the party, and shares closed at $22.00.
IndyMac is now starting to make comments differentiating themselves from REITs. Last month they spent a great deal of time explaining that they barely had any sub prime loans, just those Alt-A's.
Notably 52% of IMB float is sold short.
In the morning shares traded as high as $26.10. In the afternoon, after AHM spoiled the party, and shares closed at $22.00.
IndyMac is now starting to make comments differentiating themselves from REITs. Last month they spent a great deal of time explaining that they barely had any sub prime loans, just those Alt-A's.
Notably 52% of IMB float is sold short.
Qwest - Notebaert's work done?
Today Qwest (Q) reported improved net income and cash flow on a slight decline in revenues.
Taking a closer look at the revenue- declines in local and long distance voice services were nearly offset by increases in data, internet and video services. Qwest's strategy to fill the void continues to work.
Taking a closer look at the net income and cash flow- the improvements were driven primarily by decreases in operating expenses and decreases in capital expenditures.
Chairman and CEO Richard Notebaert recently announced his retirement, after bringing the company back from the brink. For the past five years, he has driven a transformation of a company many thought doomed to bankruptcy. The latest results show that the company is basically back on track- a solid company with predictable financial performance. Does Notebaert's retirement signal that the largest changes and most significant financial advances are done?
Taking a closer look at the revenue- declines in local and long distance voice services were nearly offset by increases in data, internet and video services. Qwest's strategy to fill the void continues to work.
Taking a closer look at the net income and cash flow- the improvements were driven primarily by decreases in operating expenses and decreases in capital expenditures.
Chairman and CEO Richard Notebaert recently announced his retirement, after bringing the company back from the brink. For the past five years, he has driven a transformation of a company many thought doomed to bankruptcy. The latest results show that the company is basically back on track- a solid company with predictable financial performance. Does Notebaert's retirement signal that the largest changes and most significant financial advances are done?
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