Daily Archives: August 5, 2007

Have Tech Blogs Killed CNET (CNET)?

In the last quarter, revenue at CNET (CNET) hit $97.2 million. That was only 5% better than the same quarter a year ago. Given that CNET is perhaps the premier provider of tech information on the web and had over 31 million unique visitors in the US during June, the lack of growth seems amazing.

The company has a market cap of $1.1 billion, so it trades well below 3x sales. TheStreet.com (TSCM), which has a similar business model, trades at nearly 6x.

CNET has options back-dating issues, but that does not appear to be an problem that will severely hurt the company’s business operations.

A fair amount of evidence points to blogs as the cuplrit for CNET’s troubles. A quick look at the largest blogs shows that most of them cover technology related subjects: Engadget, Boing Boing, Gizmodo, TechCrunch, O’Reilly’s Radar, and GigaOm. And, that is only a partial list.

While these technology blogs do not bring in a great deal of money now, they do siphon off readers, and, they are inexpensive to operate. CNET keeps large editorial and sales staffs. The company had a small operating loss of just under $1 million in its last quarter.

To counter the rising audiences at tech blogs, the company has set up The CNET Blog Network. It is hard to say how large an audience this draws, but it does not seem to be doing much for the company’s revenue. The next couple of quarters should tell.

In the meantime, CNET may have to get into the business of buying some of the larger tech blogs. It may be the best way for the company to stay relevant to its customers.

Wall St. might argue that tech blogs won’t fit into the larger company’s culture which could cause the key people to leave. But, AOL was able to take in Weblogsinc, and it appears that Engadget and JoyStiq are doing just fine.

For CNET, going it alone does not seem to be a very promising path.

Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.

Posted on: August 5, 2007 – 3:10 pm in Uncategorized, ,

Sprint’s (S) Lost Opportunity

Cable companies don’t have cell phone service to market to customers. And, Sprint does not have a broadband-to-the-home operation like the ones the big cable guys operate to market their internet and TV products.

Sprint is fighting for its life against AT&T (T) Wireless and Verizon Wireless. AT&T and Verizon have high-speed internet and TV products rolling out to capture share from cable.

Cable and Sprint’s wireless operations. A match made in heaven. Cable and the cell carrier company attacking their mutual enemies together.

What an idea.

Most investors forget that Sprint and several cable companies including Comcast (CMCSA) and Time Warner Cable (TWC), announced just such an alliance in November 2005. It was given the name Pivot.The Associated Press recently described the project as a bomb.

Looking at the stocks of Comcast, Verizon, AT&T, and Sprint over the last year, it appears that big telecom is getting the lion’s share of the stock marekt’s support. AT&T and Verizon are both up about 30% while Comcast and Sprint are only up about 10%.

Maybe putting some effort into Pivot would be a good idea.

Douglas A. McIntyre

Posted on: August 5, 2007 – 1:28 pm in Uncategorized, , , , ,

Sony (SNE): Another Set-Back For PS3

The Nintendo Wii has done it to Sony (SNE) again. During July, the Wii outsold the new PS3 in Japan by a margin of four to one. According to Reuters, Nintendo sold 396,752 units of the Wii in the five weeks ended July 29, compared with 91,987 units of the PS3

Sony got another piece of bad news last week. Take-Two’s (TTWO) popular "Grand Theft Auto" video game has been delayed. Sony needs several popular game products to hit the market in the hope that they can lift sales of it game console.

Right now, the video game gods are lining up against he big Japanese company.

Douglas A. McIntyre

Posted on: August 5, 2007 – 12:33 pm in Uncategorized,

Microsoft (MSFT) Drops Vista Price In China

Perhaps people from around the world will travel to China to get their new Microsoft (MSFT) Vista operating system. The company has dropped its price for Vista Home Basic to $66.

Research firm IDC estimates that 84% of the software used in China last year was pirated. The Chinese government has mandated that PCs sold in the country have the operating system pre-installed.

All of these move are good ideas, but they are half measures. As the film industry has found, nothing short of tracking down pirates and severely punishing them is likely to change the Chinese practice of stealing intellectual property from other countries.

The issue now is what will Microsoft do if the large majority of Windows used in China continues to bring the company no revenue.

The answer is, the company can’t do a thing.

Douglas A. McIntyre

Posted on: August 5, 2007 – 7:21 am in Uncategorized,

Will Boston Scientific Be Broken-Up?

The current version of Boston Scientific (BSX) is a merged compeny. The former Guidant sales are the heart rhythm managment operations of the new company. Heart stent sales come from the old BSX. The firm also has an endosurgery business that it was readying for an IPO.

But, the IPO has been pulled, perhaps due to market conditions. BSX has put its fluid management business on the market, and a deal for that could happen this year.

But, as its cash flow falls, primarily due a sales drop-off caused medical risks uncovered in its stents, BSX is suffering from anemic cash flow. The situation is bad enough so that its bonds have been dropped to junk status. BSX took on $5 billion in bank debt to buy Guidant and now has a total of $9 billion in debt.

Standard & Poor’s and Fitch Ratings are concerned about the odds of the company being able to make its nut.

BSX may be running out of options very quickly. The endosurgery business has about $1.4 billion in revenue. The planned IPO of 25% of that business would have brought in over $1 billion.

Watch for BSX to sell the entire endosurgery operation. If it can fetch $4 billion, it is well worth losing the unit and its revenue to pay down debt. A sale of the fuild management operations would add another chunk of cash..

The disposal of the two businesses would go a long way to solving the BSX short-term debt problem. It would make the parent company smaller, and would take away two of it fast-growing businesses. What would be left is a company that is still in trouble, but one that bought itself some time.

BSX shareholders have seen the value of the company drop over 55% in the last two years, and that is unlikely to change under almost any circumstances.

Douglas A. McIntyre

Posted on: August 5, 2007 – 7:11 am in Uncategorized,