Posts for Ticker ‘CNET’

CBS (CBS) To Buy CNET (CNET): Odd News

In a move that makes little sense, a TV network, CBS (CBS) will buy a tech website business, Cnet (CNET).

The price was $11.50. Cnet has been under pressure by activist shareholders to sell the company or restructure units.

According to CBS "The acquisition will make CBS one of the 10 most popular Internet companies in the United States, with a combined 54 million unique users per month, and approximately 200 million users worldwide."

It is, however, a TV company buying a online tech business. Nice match

Douglas A. McIntrye

Posted on: May 15, 2008 – 6:21 am in Mergers and Buy Outs, ,

Top 10 Pre-Market Analyst Calls (WTR, BYD, CNET, CTRP, GOOG, SOLD, NITE, NYX, SOHU, VDSI)

These are ten of the top analyst calls we are focusing on this morning:

  • Aqua America (NYSE: WTR) cut to Market Perform at Wachovia.
  • Boyd Gaming (NYSE: BYD) started as Sell at Banc of America.
  • CNET (NASDAQ: CNET) started as Buy at Kaufman Bros.
  • Ctrip.com (NASDAQ: CTRP) cut to Neutral at Piper Jaffray.
  • Google (NASDAQ:    GOOG) started as Buy at Kaufman Bros
  • Housevalues (NASDAQ: SOLD) raised to Buy at Cantor Fitzgerald.
  • Knight Capital Group (NASDAQ: NITE) cut to Equal Weight at Lehman Brothers.
  • NYSE Euronext (NYSE: NYX) raised to Buy at Deutsche Bank.
  • Sohu.com (NASDAQ: SOHU) cut to Hold at Deutsche Bank.
  • VASCO Data Security (NASDAQ: VDSI) raised to Buy at Jefferies.

Jon C. Ogg
May 7, 2008

Posted on: May 7, 2008 – 7:01 am in Analyst Calls, , , , , , , , , ,

CNET’s (CNET) Pathetic Quarter

The arguments that CNET’s (CNET) board should retain its current management went away today when the company announced it Q1 results.

Total revenue was up a very modest 3% to $91.4 million. Non-GAAP operating income before depreciation, amortization, stock compensation expense, restructuring charges and stockholder proposals and stock option investigation related costs, net, was $1.7 million compared to $11.0 million during the first quarter of 2007.

CNET’s revenue is not growing as fast as internet advertising in general. That is almost impossible to explain given management’s argument that it has some of the best online content destinations in the world. CNET claims that its unique users are 161.3 million up from 143.7 in the same quarter a year ago. Average daily pages-views rose from 81.2 million last year to 89.7 million in the most recent period. In other words, CNET is getting a much smaller yield from its page-views and visitors than it was a year ago.

The company’s guidance was equally dismal. Revenue in the second quarter is expected to move up only 6% to 10%. On an EPS basis the company says it will breakeven.

Management views its financial performance as an improvement. With the figures from Q1 and CNET’s outlook, that can’t be supported.

Douglas A. McIntyre

Posted on: April 24, 2008 – 5:32 pm in Earnings,

JANA Stays After CNET (CNET)

JANA Partners LLC has released a detailed white paper analysis of CNET Networks Inc. (NASDAQ: CNET).  As you can guess, the activist investor group is rather disappointed with CNET.  The groups that JANA has added into its shareholder group hold approximately 14.9% of the voting power in the stock, and JANA’s stake is 5% of the total.

They argue that stopping the destruction of shareholder value at CNET will require fundamental strategic and operational change.  Jana notes that implementing this change will require the type of experience and expertise it believes the Board nominees the group has proposed would add to CNET’s Board of Directors. 

JANA has noted that the performance of the current board of directors has presided over the loss of more than half of CNET’s market value since a majority of current directors have been in place.  CNET’s shares declined by -21%, -52%, and -25% in the one, two and three year periods ended March 28, 2008.  It also wants the board to explain why shareholders would not benefit from Jana’s proposed changes.

JANA addresses its rejection of CNET’s offer of one of the seven board seats the group is seeking.  It feels this would not bring the level of change needed at CNET.  There are many other criticisms.  CNET has failed to turn these assets into shareholder value and its own review was only initiated after outside pressure mounted. CNET has not taken necessary changes to protect the value of its strongest assets, instead expanding into new verticals. CNET needs comprehensive strategic and operational change to strengthen its core businesses and adapting to the modern Internet.  The group wants new leadership to create significant new value for shareholders.

JANA has joined with Sandell Asset Management Corp., Paul Gardi of Alex Interactive Media, Spark Capital and Velocity Interactive Group in seeking to elect two individuals to replace the board members who are up
for re-election and to expand CNET’s board by five members and nominate individuals to fill those vacancies.

We frequently discuss restructurings, activist investor trends, IPO’s, back door plays into IPO’s, SPAC’s, spin-offs, and more on our open email distribution list.  We also just covered CNET on our weekly "10 Stocks Under $10" subscriber letter yesterday.  We aren’t quite as optimistic on the instant value creation, but JANA’s approach is one of long-term changes rather than short-term shareholder rewards at the expense of the long-haul.

More detailed information can be found on this particular situation at www.JANAGroupInfo.com.

Jon C. Ogg
April 1, 2008

Jon Ogg produces the Special Situation Investing Newsletter and he can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Posted on: April 1, 2008 – 9:11 am in Activist Investor, Internet,

Bleak House: Despair On The 52-Week Low List (GE)(VZ)(GOOG)(C)

Those rummaging through the garbage of 52-week low lists are usually bottom-fishing investors or desperate CEOs. But, the list is so broad that it has become a tableau of the market as a whole, especially the breadth of the market’s decline across almost every industry.

Not a single person in the world is surprised that financials like Bear Stearns (NYSE: BSC), Goldman Sachs (NYSE: GS), Citigroup (NYSE: C), and Cigna (NYSE: CI) hit bottoms last weak. Over in the car business both Ford (NYSE: F) and GM (NYSE: GM) dropped to lows. Perhaps more surprising Toyota (NYSE: TM), the world’s most successful car company, came close. Given its vast resources and cash position, that news said more than the GM or Ford numbers did.

Airlines, as expected, were crushed. AMR (NYSE: AMR) was at the front of the Charge of the Light Brigade. Retail would also expected to be down and many stocks in that sector were at bottom including the previously popular Best Buy (NYSE: BBY).

The newspaper industry, the dying art of people reading information off something other than a computer screen, also had a number of lows, led by Gannett (NYSE:GCI) and McClatchy NYSE: MNI).

If the painful trend ended here, with these sectors, it would at least be in line with what might be expected in troubled industries in a slowing economy. But, it does not.

Communications companies, in both telecom and cable, hit bottoms. Verizon (NYSE: VZ) did the limbo. So did Comcast (NYSE: CMCSA). These firms are known for the breadth of their businesses, astonishing cash flow, and iron-clads balance sheets. By the market’s logic, that data meant little.

Tech also was sucked under. That included some of the first class companies in the sector like Adobe (NYSE: ADBE), Nvidia (NASDAQ: NVDA), and Infosys (NASDAQ: INFY). This is worth some analysis. NVDA is expected to have a 37% increase in revenue this quarter and EPS that will move from $.28 last year to $.39. The company is down almost 50% from its 52-week high. Analysts expect Infosys revenue to be up 32% for the current period. Wall St.’s whirlpool is taking under strong companies as it pulls down the weak.

The same might be said for Big Pharma. Bristol-Myers (NYSE: BMY), Pfizer (NYSE: PFE), and Merck (NYSE: MRK) all posted lows. The markets have been worried about their product pipelines, but that issue has not become more acute recently and these companies are still, for the time being, cash machines. Most have yields above 1.5% and some are much higher.

Deep trouble has also extended to the internet content business which has done well since the tech crash of 2000. Last week TheStreet.com (NASDAQ: TSCM), CNET (NASDAQ: CNET), and IACI (NASDAQ: IACI) dropped to 52-week lows. Given the low fixed costs that these companies sport along with pristine balance sheets, they would seem to be due some break.

Older line media companies, which have said they are not seeing any profound slowing in their businesses we sold off in a near panic dropping CBS (NYSE: CBS) and Time Warner (NYSE: TWX) to the lowest end of their charts.

Alternative energy stocks, not so long ago darlings, pushed to new bottoms. Verasun (NYSE: VSE) and Trina Solar (NYSE: TSL) could not hold on. Even the high cost of oil could not give them buoyancy

The most stunning part of all of this is the capitulation of the blue chips. Boeing (NYSE: BA) hit a 52-week low. The Air Force contract it lost is not worth enough spread over its life to do any real damage. Google (NASDAQ: GOOG) bottomed telling Wall St. that a company with 60% market share and 50% earnings growth was not worth some premium.

And, General Electric (NYSE: GE), the market’s poster boy for American services and industry, hit its low for 52-weeks. It has not backed off its robust projections for EPS improvement. It credit ratings remain the envy of almost every other company in the world. Its business and geographic diversity are supposed to make it the business equivalent of Plato’s ideal of the perfect state.

To look for investor concern about how deep and long the recession will be, the 52-week low list may be the most telling set of numbers available. It is an unusually broad and deep data-base. It is about money, and without emotion.

The list is saying that things are worse off than they seem.

Douglas A. McIntyre

Posted on: March 16, 2008 – 11:49 am in HI/LOW, , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

Media Digest 2/6/2008 Reuters, WSJ, NYTimes, FT, Barron’s

According to Reuters, BHP BIlliton (NYSE: BHP) raised its bid for Rio Tinto (NYSE: RTP).

Reuters writes that Microsoft (NASD: MSFT) may raise its bid for Yahoo! (NASD: YHOO).

Reuters reports that the current economic slump could be worse than recent downturns.

The Wall Street Journal writes that junk bond defaults are expected to spike up this year.

The Wall Steet Journal reports that the value of loans for corporate LBOs are falling sharply making them difficult for banks to sell.

The Wall Street Journal writes that Google (NASD: GOOG) is picking up its effort to increase its share of the Chinese market.

The Wall Street Journal reports that Disney (NYSE: DIS) posted strong results.

The New York Times reports that CBS (NYSE: CBS) wil launch a program to target mobile phone users by location.

The FT writes that possible downgrades of bond insurers hit bank stocks.

The FT reports that music companies have launched a lawsuit against Baidu (NASD: BIDU).

Barron’s writes that Macrovision is s cheap way to play the rise of the digital living room.

Barron’s reports that CNET"s (NASD: CNET) guidance for 2008 is light.

Douglas A. McIntyre

Posted on: February 6, 2008 – 4:02 am in Press Digest, , , , , , , , ,

Top Pre-Market Stock News (January 7, 2008)

Below is a snapshot of some of the key impact news affecting stocks in pre-market trading this Monday, January 7, 2008:

  • AllianceBernstein (AB) noted as a hidden gem in Barron’s cover story.
  • Answers Corp. (ANSW) announced a collaboration with Nokia for Series 40 and S60 mobile devices.
  • Avocet (AVCT) lowered guidance
  • Biogen-Idec (BIIB) and Elan (ELN) say that the safety data continues to support a favorable benefit-risk profile for TYSABRI.
  • Celgene Corp. (CELG) trading up 5% after guidance is in-line for 2007 and issued new guidance for 2008.
  • CNET (CNET) had a Jana Partners-led investor group take a 21% stake and try to oust the board of directors.
  • Diana Shipping (DSX) trading up almost 2% on positive Barron’s article over weekend.
  • 8X8 Inc. (EGHT) introduced a free international mobile calling plan with its new Packet8 MobileTalk trial.
  • hhgregg (HGG) reaffirmed 2008 EPS guidance of $0.95 to $1.03 vs. $1.00 est.; s-s-s up 3%.
  • JA Solar (JASO) announced a 3 for 1 stock split.
  • Jefferies (JEF) issued earnings warning.
  • Krispy Kreme (KKD) announced it has elected a new CEO.
  • Microsoft (MSFT) said at "CES" it had 100 million licenses sold of Windows Vista; 17.7 million Xbox 360’s, 10 million Xbox live users; will have new content downloads.
  • Napster (NAPS) will sell music with less copyright protection as MP3 files.
  • Nice Systems (NICE) received multi-million dollar orders from 2 of the top-3 US banks for fraud alert.
  • Rogers Communications (RCI) raised annual dividend from $0.50 to $1.00 and put 2008 revenues $11.2 to $11.5 Billion versus $11.25 Billion estimates; announced share buyback.
  • Schnitzer Steel (SCHN) missed earnings and revenue targets; stock trading down 1% so far.
  • Sony (SNE) introduces new tri-recording video Camcorder at "CES".
  • TASER (TASR) unveils its new leopard print TASER C2 personal protection device at the 2008 International Consumer Electronic tradeshow in Las Vegas today.
  • Zumiez (ZUMZ) said December s-s-s was +3.9%, but guided lower; shares down over 1%.

Jon C. Ogg
January 7, 2007

Posted on: January 7, 2008 – 8:32 am in Pre-Market Activity, , , , , , , , , , , , , , , , , , , , ,

A Hostile Takeover At CNET (CNET)

Hostile takeovers have come to the online content world. A group of outside investors have taken a major piece of CNET (CNET), the internet tech content company, and will try to push out the current board.

According to The New York Times "the consortium sent a letter about its plan to the CNet board two weeks ago, these people said, which the company has yet to disclose." The group is led by Jana Partners, an $8 billion fund.

Web content is becoming more and more valuable and CNET is a company which is the premier provider of content about technology. But, its shares have underperformed the market. The firm has several pieces including a software download service and TV operation. It may be the value of the shares would be enhanced if the company was broken into three.

The new announcement opens the door to the issue of whether companies with valuable content ranging from TheStreet.com (TSCM) to private companies like Huffington Post and TechCrunch could become more likely to outside offers.

The web is growing and portals lack quality content that they own themselves. That may change fairly quickly if CNET’s new investors show that the company has hidden value.

Douglas A. McIntyre

Posted on: January 7, 2008 – 5:19 am in Uncategorized, ,

Media Digest 1/7/2008 Reuters, WSJ, NYTimes, FT, Barron’s

According to Reuters, Yahoo! (YHOO) is pushing the mobile handset as the next major target for its products.

Reuters reports that analysts are trimming forecasts for the first and second quarter of this year as concerns about the economy get worse.

Reuters writes that Toshiba claims that its HD DVD format has not lost out to Sony’s (SNE) Blu-ray despite Warner’s decision to use Blu-ray exclusively.

The Wall Street Journal reports that McDonald’s (MCD) plans to add coffee bars at 14,000 stores in a challenge to Stabucks (SBUX) that could add $1 billion in sales to the fast food company’s revenue.

The Wall Street Journal reports that a number of large media companies have licensed content to Microsoft (MSFT) to be used on its Xbox Live and MSN services.

The Wall Street Journal reports that Liberty Media will buy Bodybuilding.com for $100 million in an effort to improve its internet portfolio.

The Wall Street Journal reports the Wikia has launched an open source search engine to compete with Google (GOOG).

The Wall Street Journal writes that GM (GM) is working on a car that will drive itself.

The Wall Street Journal writes that Comcast (CMCSA) will launch new technology which will make watching TV more simple.

The New York Times writes that Sony (SNE) sold 1.2 million PS3s over the holiday helping the Blu-ray fromat because a player is installed in each machine.

The New York Times writes that a group of outside investors is bidding to take control of CNET (CNET).

The New York Times writes that the company and CNBC will share content between their two websites.

The FT writes that Sony’s (SNE) success with Blu-ray is a blow to Microsoft’s digital media plans.

Barron’s writes that Microsoft will host a live video site for the Olympics.

CNN Money writes that more banks will cut dividends this year.

Douglas A. McIntyre

Posted on: January 7, 2008 – 4:03 am in Press Digest, , , , , , , , ,

No Good News For CNET (CNET) Investors

According to recent numbers from comScore, CNET’s (CNET) News.com website has been losing audience. Unique visitors in August were 2.478 million. In October, that number fell to 2.045 million. Pageviews from News.com run about six million a month. CNET lists daily pageviews in its 10-Q at 91 million. Either News.com is a very small part of the CNET total, or the comScore numbers are way off.

If comScore is accurate, tech blog TechCrunch had eight million pageviews in October. It begs the question of how CNET’s blog network is doing.

Douglas A. McIntyre

Posted on: December 10, 2007 – 12:55 pm in Media,

CNET Hit By Goldman Sachs (CNET)

CNET Networks Inc. (NASDAQ:CNET) is being maintained with a Sell, but the target is being cut from $8.00 down to $7.30.  The time frame here is being rolled forward to year-end 2008 based on fundamental outlook being more uncertain after several downward estimate revisions.

Goldman noted that results were slightly ahead of the brokerage firm’s target and in-line to slightly above the company’s own guidance.  Goldman Sachs is lowering 2008 EPS targets to $0.23 EPS (from $0.25) and 2009 targets to $0.26 EPS (from $0.29).

What is interesting here is that the research notes concerns that and industry mix shift will move to lower CPM inventory buys (clicks per thousand in advertising) and the fragmentation of end-user online usage without accelerating time spent online.  Goldman does note that unique user growth was favorable with yearly growth of 13%, but it is decelerating because page views on a relative basis were down 12% yearly.

24/7 Wall St. just noted much of the same last week.

CNET has also been tracked in 24/7 Wall St.’s "New Media Old Media" subscriber newsletter.

Posted on: November 1, 2007 – 7:04 am in Analyst Calls, Internet,

Something Is Still Wrong At CNET (CNET)

CNET (CNET) announced earnings yesterday. The stock got a little bounce after hours. But, a look at the numbers shows that the company is still in trouble. That may be why it only trades at three times sales.

Revenue at CNET rose 6% to $99.5 million. The percent increase is not much given how fast internet advertising is going up. The company had an operating loss of over $16 million, but if "goodwill impairments" are backed out, it was closer to a break-even.

Pageviews for the company’s websites were either up or down from a year ago, depending on which of the firm’s two yardsticks Wall St. wants to use. In Q3 06, average daily pageviews were just above 86 million. They were 91 million in the last quarter. But, that number drops to 76 million if the figure takes into account a migration of its US data reporting platforms to its international properties.

The company also reported that 141 million unique visitors up from just over 124 million in the same quarter of last year.

All of this improvement in pageviews and visitors ought to drive a very big increase in advertising revenue, but, it did not.

And, that is the strange part.

Douglas A. McIntyre

Posted on: October 26, 2007 – 5:59 am in Earnings,

The Train Wreck At CNET (CNET) Gets Worse

Stifel Nicolaus downgraded CNET (CNET), the big online tech website business. It dropped the shares 7% to $8.27. The stock had risen recently on rumors of a buy-out by its former CEO.

CNET now trades at a modest 3.4x revenue. TheStreet.com (TSCM), the financial content site, trades at 7x.

Wall St. would think the shares would be headed up. An options probe of the company ended recently.

But, the company’s financial results have been poor, especially given the large number of unique visitors to it network of websites. CNET Networks’ global network of Internet properties reached an average of 137 million unique monthly users during the second quarter of 2007, an increase of 18 percent from the second quarter of 2006

Total revenues for the June quarter were $97.2 million, a 5 percent increase compared to revenues of $92.4 million for the same period of 2006. Not impressive at all for a company largest supported by internet advertising. Net cash provided by operating activities for the second quarter of 2007 was $17.5 million, up from $14.9 million for the second quarter of 2006. An equally weak number.

So, CNET’s audience is growing faster than its revenue, a sign that advertisers don’t have much faith in the company’s content.

Are sites like TechCrunch and GigaOm offering content that is considered more important to tech readers? Could be.

Douglas A. McIntyre

Posted on: October 15, 2007 – 8:59 am in Internet,

TheStreet.com Hits Seven-Year High (TSCM)

TheStreet.com (TSCM) hit a seven-year high today at $13.72. It is hard to point to one factor driving the stock. Jim Cramer is as popular as ever, Wall St. probably is looking for a strong third quarter.

But, the reason for the move up in the shares could simply be an acknowledgment that online content has become very valuable. The premium that News Corp (NWS) paid for Dow Jones (DJ) is some indication of that. NBC recently bought cable company Oxygen.

There is increasing speculation about the value of private online content sites. CBS has recently acquired video financial site WallStrip.com. NBC bought news aggregation site Newsvine.

The cycle for TheStreet has been a long one. Like many other internet businesses, it was punished in 2000. The beating lasted a long time, but TSCM had company. Shares in CNET collapsed and really did not come back until 2004.

With a forward P/E of 20, TSCM is not expensive, even at its new high.

Douglas A. McIntyre. McIntyre was a member of the board at TSCM until 2005.

Posted on: October 11, 2007 – 1:43 pm in Media, , , , , ,

Is TechCrunch Worth $100 Million?

There has been a great deal written about the 24/7 Wall St. piece on the value of big blogs. While we put a value of $100 million on Huffington Post, we did not offer a value for TechCrunch.

But, it is worth a lot. It recently topped the BusinessWeek list of favorite blogs. Technorati says that almost 145,000 blogs like to the TechCrunch site.

In 2006, The Wall Street Journal wrote that TechCrunch has revenue of $120,000 a month. And "TechCrunch had about a million global page views in September, compared with 13 million for CNET News, according to comScore Networks Inc."

TechCrunch is now building a conference business and expanding its network of blogs. It probably fair to guess that it has grown to a revenue run rate of $5 million. To believe that the figure could double to $10 million in 2008 is not unreasonable.

Most analysis of the value of TechCrunch is based on what a financial model says it is worth. But, that is not an accurate way to make the evaluation. The real question is what someone would pay. Rupert Murdoch will pay $5 billion for Dow Jones (DJ). Its operating income in 2007 will be about $150 million. So, he is willing to pay 33 times operating income. If TechCrunch as $2 million in operating income this year, a comparable valuation would be $66 million.

Over on the Facebook side of town, industry experts put the company’s revenue at $150 million for 2007. If Microsoft (MSFT) is willing to buy 5% for $500 million, the company is worth $10 billion, about 66 times revenue. By the way, Chinese search engine company Baidu (BIDU) trades for 67 times revenue. And, it is a public company.

Is TechCrunch worth $100 million. In this environment, it may be worth more. Particularly if a larger company really needs it.

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

Posted on: October 4, 2007 – 5:02 am in Media, , ,

TechCrunch And Huffington: Who Will Buy The Big Blogs?

The name brand blogs. The big ones. Huffington. TechCrunch. GigaOm. Boing Boing. Ars Technica. SeekingAlpha.

AOL has already bought Weblogsinc. It owns popular blogs including flagship Engadget.

But, with the internet operations at newspapers and some other tradition media companies making very little headway, the big blogs take on a very significant attraction. They reach audiences in great numbers. They have credibility. They are not expensive to run. And, they make money.

Take Huffington. According to research firm Compete, it has an audience almost as large as the online version of the Philadelphia Inquirer. As a part of a larger newspaper organization like The New York Times (NYT) or Washington Post (WPO), that audience could probably be much bigger. NYT and WPO need a Huffington or two. Their internet revenues are under 10% of their total and not growing fast enough to keep up with falling print sales. Huffington has raised $10 million in VC money. What is it worth? $100 million. Maybe more. Worth it for The Times or The Post. With the trouble that are in, yes.

The big tech blogs are even larger than Huffington.

According to internet measurement service, TechCrunch has an audience about a third of CNet (CNET). And CNet is in bad shape. It’s blog business has not caught on. In early 2006, its shares were $16. Now they trade at under $8. Do they need a way to improve their reach and image with the online tech crowd?

Alexa actually puts TechCrunch’s reach at double wsj.com. If Mr. Murdock’s News Corp (NWS) is going to start offering Dow Jones (DJ) print products for free, having a large tech news property could be a big deal. Tech site Ars Technica also has a larger reach than wsj.com. Another major tech blog that could enhance the overall web presences of Dow Jones.

In the core financial news field, SeekingAlpha is the largest stock market blog. It runs close to 100 stories some days. That is a lot of extra content, low priced content, for a company like Reuters (RTRSY), The New York Times, or Dow Jones.  More page impressions. A larger audience for online marketing.

The largest blogs will get offers. Too many big media companies need additional outlets and content on the web. The problem for the potential buyers is keeping the talent at the blog sites. Most rely on just one or two big names. But, that is not unlike the issue that TheStreet (TSCM) has with Cramer. He is the franchise. They have to give him incentives to stay.

The New York Times or Washington Post will stop by to see Huffington. It is just a matter of how soon.

Douglas A. McIntyre

Posted on: October 3, 2007 – 6:07 am in Media, , , , , , ,

Is Yahoo! (YHOO) Better Off As Two Companies?

Yahoo!’s (YHOO) international operations are OK, especially if you compare them to the domestic part of the company.

In the last quarter, Yahoo! US grew only 5% to $1.11 billion. International operation grew 15% to $579 million. There is level of currency risk/reward in the overseas businesses. And, the company has at least two very valuable assets. One is its 34% ownership in Yahoo! Japan which was valued at just under $7 billion as of June 30.. Softbank is the other large owner. In the second quarter, revenue at the Japanese company rose 20% to $482 million.

Yahoo! also has a 44% interest in Chinese online company Alibaba. The e-commerce operation plans to go public and raise $1 billion in the current quarter. Yahoo!’s piece of the company is certain worth in the billions of dollars.

It is fair to assume that with Yahoo! trading at 5.3 times sales, an new independent international company would trade closer to 7x to 8x. That is about $18 million. Add in Yahoo!’s ownership in the Chinese and Japanese companies and the market value of Yahoo! International would  probably be closer to $25 billion to $30 billion. The entire YHOO market cap is $36 billion now.

This leaves Yahoo! US with a value of $6 billion to $8 billion. That is for the part of the company that has a $4,5 billion run rate. It is only a 2x revenue valuation. Too low? CNET (CNET), a technology information portal trades for 2.8x. ValueClick (VCLK), an online advertising operation trades a 3.7x, which has been pushed up sharply by M&A rumors.

And, Yahoo! US is no longer growing.

This would leave Yahoo! US to cut costs and try to improve its display ad rates through new methods like behavioral targeting. Based on the company’s 10-Q, Yahoo! US had operating costs of $756 million before depreciation and amortization and stock-based costs. Could these costs be cut? If the new company was only operating in the US, it would seem likely.

Not unlike the upcoming plan to split Altria (MO) into two pieces, Yahoo! shareholders would get to have two bets to make and not one. The first company would be the faster growing overseas operation with valuable assets in Japan and China.

The second company would have a much lower growth rate. But, its cost cutting potential and the chance that it can do a better job of getting improved rates for its inventory might give the company a chance to improve a dismal performance. And, that could give the US shares some real upside.

Douglas A. McIntyre

Posted on: September 30, 2007 – 4:55 pm in Internet, , , ,

Pre-Market Analyst Calls (September 19, 2007)

ADP added to Goldman Sachs Conviction Buy List.
AOS cut to Underperform at Baird.
ASBC raised to Equal weight at Lehman.
BBX cut to Mkt Perform at KBW.
BHE cut to Neutral at JPMorgan.
CCE cut to Hold at Deutsche Bank.
CCJ cut to Neutral at Merrill Lynch.
CFR cut to Equal Weight at Lehman.
CKFR cut to Hold at Citigroup.
CNET started as Neutral at Oppenheimer.
DIS started as Outperform at Credit Suisse.
EGP started as Buy at Cantor Fitzgerald.
INTX raised to Strong Buy at JMP Securities.
JNPR cut to Neutral at Merrill Lynch.
LCC started as Overweight at Morgan Stanley.
MELI started as Overweight at JPMorgan.
MFA raised to Outperform at Bear Stearns.
MFE cut to Underweight at Morgan Stanley.
PLXS raised to Overweight at JPMorgan.
PRGN started as Buy at UBS.
RHD cut to Neutral at Goldman Sachs.
RT raised to Overweight at JPMorgan.
SIRI cut to Neutral at UBS.
SIVB cut to Underweight at Lehman.
TCBI cut to Equal Weight at Lehman.
TWX started as Neutral at Credit Suisse.
VG cut to Sell at Soleil.
VIA started as Neutral at Credit Suisse.
WRNC raised to Overweight at JPMorgan.
WBS raised to Equal Weight at Lehman.
XMSR cut to Neutral at UBS.
ZINC started as Outperform at FBR.

If you enjoy reading the key upgrades and downgrades on Wall Street, tune in here to 24/7 Wall St. between 7:30 and 8:00 AM EST every day.

Jon C. Ogg
September 19, 2007

Jon C. Ogg produces the 24/7 Wall St., LLC Special Situation Investing Newsletter; he does not own securities in the companies he covers.

Posted on: September 19, 2007 – 7:04 am in Analyst Calls, , , , , , , , , , ,

Yahoo!: Changing Generals After The War

Yahoo! (YHOO) has announced that its head of sales is out. That part of the company will be combined with a business development unit and run by a new chief. It does mean that YHOO has lost its two most visible sales executives, the ones with the greatest ties to Madison Avenue, wherever that may be. Having this kind of turmoil among the people who bring in the money doesn’t sound wise.

But, no matter. Yahoo! has already lost the war for getting rapid growth from its current businesses. Display ad growth is slowing across the industry and Yahoo!’s improvement there is almost at a standstill. The company’s new Panama project, which was build to take market share from Google’s text ad business, has not show that it can push back the tide of a stagnant topline.

Yahoo! does have e-commerce and licensing businesses, but it is not in a lead position in any of these. Its jobs site is fairly large. The company has modest shopping and travel businesses, but they are not at a scale where they can pull the company out of the mud.

All of this means that, withing reason, it does not matter who runs the revenue operations at YHOO. The company does not have the tools it needs to restart growth.

M&A is almost certainly Yahoo!’s only way out. It is risky. With its stock so low, the portal company will have to give up a large part of its equity to get anything good. It will probably have to gamble that the social network business can eventually bring in a lot of revenue. Facebook is now the No.17 site in the US in terms of traffic. Yahoo! could makes some buys in vertical markets, perhaps pick up Monster (MNST) or CNET (CNET).

But, this is all old news. Yahoo!’s future strategy is endlessly debated.

In the meantime, the company is not doing anything.

Douglas A. McIntyre

Posted on: August 30, 2007 – 4:43 am in Internet, , , ,

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, ,