FT.com reports that Liberty Media Corp (NASDAQ: LCAPA) and EarthLink (NASDAQ: ELNK) may enter the bidding for AOL's dial-up internet access operation (which shares a parent, Time Warner (NYSE: TWX), with BloggingStocks). Liberty thinks its advantage is its ability to do a "tax efficient transaction."
Meanwhile Liberty's stake in Time Warner is worth just slightly more than the price tag Time Warner has placed on AOL's dial up unit. As FT.com wrote, "Liberty Media's 103m shareholding in Time Warner was valued at $1.64bn last night, slightly above analysts' $1.5bn valuation of AOL's access business."
Liberty's interest is new but industry analysts have seen EarthLink as "the only likely strategic buyer for AOL's dial-up business." FT.com notes that Rolla Huff, EarthLink's CEO, "told the Wall Street Journal this month that a deal for AOL's access business was something 'worth aggressively pursuing'."
The Wall Street Journal (subscription required) reports that BloggingStocks' parent -- Time Warner (NYSE: TWX) -- is almost done with the work of separating AOL's 8.7 million subscriber dial-up business from its advertising one. And Earthlink (NASDAQ: ELNK), with 3.3 million subscribers, appears to be the logical partner -- particularly if it's willing to pay more than the $2 billion to $3 billion the Journal estimates its worth.
When AOL announced two years ago that it was going to get out of the Internet access business and focus on advertising, I wondered how it would come up with the roughly $2 billion it would lose from the plan to give away all of AOL's content and services to subscribers who don't use AOL for dial-up access. The plan was to replace that cash flow with advertising sales. But the most recently available comparison shows that AOL's revenue has declined 43% from $1.981 billion in Q1 2006 to $1.128 billion in Q1 2008. A 64% drop in subscription revenues to $559 million was not offset by the 41% increase in advertising revenues to $552 million.
Still, I think the idea of combining AOL's shrinking dial-up business unit with Earthlink could benefit Time Warner and yield some cost savings that would boost Earthlink's cash flow.
I've seen it many times: a cool product that finds few customers. That seems to be the case with Helio's mobile phones. Basically, customers didn't want to pay premium prices for such things as access to MySpace and other new-fangled features.
It's a tough lesson (and expensive). SK Telecom and EarthLink (NASDAQ: ELNK) formed Helio as a joint venture in 2005 with start-up capital of $440 million. SK Telecom invested an additional $270 million in the venture last year.
Yet, in the end, Helio turned out to be a big dud. That is, the company sold out for a measly $39 million to Virgin Mobile USA (NYSE: VM). In fact, the space is full of dead companies, such as Disney Mobile and Amp'd Mobile.
I had a chance to interview Frank Dickson, the co-founder and chief research officer of MultiMedia Intelligence. According to him:
Honestly, the merger is a desperate move. Overall, the MVNO (Mobile Virtual Network Operator) model makes sense in a limited number of situations. For example, if a cable MSO wants to leverage its customer base and offer triple or quadruple play offering, there is a clear distinctive competency and the MVNO route makes sense.
Once thought to be extremely safe, action rate securities have proved difficult to sell in this credit crisis. Tech companies are big holders of them and are taking charges left and right, including MetroPCS Communications Inc (NYSE: PCS), Palm Inc (NASDAQ: PALM) and Earthlink Inc (NASDAQ: ELNK), according to the Wall Street Journal.
NYSE Euronext Inc (NYSE: NYX) will look to increase its stakes in India's National Stock Exchange and the country's Multi Commodity Exchange, the Business Standard reported, once foreign ownership rules are eased. NYSE Euronext also intends to partner with the two Indian exchanges in order to help them develop their business.
WEB SITES:
Business Week reported that Brian Marckx of Zacks Investment Research said Bristol Myers Squibb Company (NYSE: BMY) may be an attractive takeover candidate for a larger pharma such as Pfizer Inc (NYSE: PFE) or France's Sanofi-Aventis SA (NYSE: SNY), both of which have been partners with Bristol on some of its products.
This week, EarthLink Inc. (NASDAQ: ELNK) announced its Q4 results. There was a loss of $9.5 million, or $0.08 per share, which included a $31.1 million write-off from its wi-fi assets.
And, yes, now the company wants to offload the segment. So what does this mean for EarthLink, as well as the space?
Probably the most common question this sale generates is, why would anyone want to buy the business? It ultimately depends on how much is the asking price, and what actual assets come with the deal. If you look back at Metricom, who marketed Ricochet, they didn't get a whole lot when they sold their business out of bankruptcy court.
MOST NOTEWORTHY: Earthlink, NetSuite and Gramercy Capital were today's noteworthy initiations:
B. Riley assumed coverage of Earthlink (NASDAQ: ELNK) with a Buy rating and $10.60 target, as they view the leading dial-up and broadband ISP as an attractive value-play.
Citigroup initiated shares of NetSuite (NYSE: N) with a Sell rating, as they believe the current valuation implies the company needs to show significant upside.
Gramercy Capital (NYSE: GKK) was initiated with an Overweight rating at JP Morgan on valuation and dividend yield.
OTHER INITIATIONS:
Goldman started Fiserve (NASDAQ: FISV) with a Buy rating.
Its balance sheet is clean and straight forward, debt is less than 25% of capital, it produces over $70M a year in operating cash, pays a 3.5% dividend and buys back its stock, but, asks the Wall Street Journal's "Smartmoney Stock Screen" about Journal Communications Inc (NYSE: JRN), is this stock a bargain or perhaps a takeover candidate?
OTHER PAPERS:
According to two people familiar with the matter, the FTC is expected to approve the proposed $3.1B acquisition of DoubleClick by Google Inc (NASDAQ: GOOG), the Washington Postreported.
WEBSITES:
According to an inside source, Earthlink Inc (NASDAQ: ELNK) executives, including an executive VP and a VP, have left the company over the last week, DSLreports.com noted. The company is also cutting VOIP and Muni-Wifi services, in addition to the previously announced job cuts.
This week, EarthLink (NASDAQ: ELNK) continued its moves to restructure operations. The new initiative? Well, it is to explore "strategic alternatives" for its municipal Wi-Fi business. In other words, the company is looking for a buyer for the division.
"The only ones who see this announcement as a cause for pause - whether detractors or supporters of municipal broadband - are people who continue to be distracted by the concept of muni networks as a consumer-centric application. Those of us who've said since 2006 that these networks' viable business case lies with local governments and businesses looking to improve operations understand that this is a logical progression for EarthLink. EarthLink could very well unveil services that position it to meet these needs.
Frequently, the difference between a successful investor and one less so is all timing. Making money in the market requires not only picking the right companies to invest in, but also deciding when (or when not) to invest in such companies.
I rediscovered Earthlink (NASDAQ: ELNK) last year while running a value screen. Like many stocks that end up in the proverbial value barrel, this company was once a high flier, trading at a split-adjusted $50, while now trading around $8. There were highs and lows, culminating in Earthlink's founder being charged with fraud and money laundering. I recalled that Earthlink was in the now-dying dial-up ISP business during the bubble days of the internet and decided to dig a little deeper.
What I saw, when I looked under the hood, caught my attention. While Earthlink was indeed seeing dial-up customers dial-out of their contracts, Earthlink was converting a good percentage of these customers to DSL service. It was working well -- while the company wasn't growing much, it was producing a lot of cash from operations and instead of just building a cash horde, like many companies would do in a situation like this, the company was looking to reposition itself with two major, seemingly sexy initiatives.
With the massive restructuring at EarthLink (NASDAQ: ELNK), one of the casualties is municipal Wi-Fi. The company was a backer of a roll-out in San Francisco – along with Google (NASDAQ: GOOG) – and in Houston.
Yes, free Wi-Fi can be a boon for cities, such as in terms of bringing in new business. However, it's not easy to pull off.
So, might the actions of EarthLink mean the death knell to the movement?
"Last week's string of announcements by EarthLink serve as a huge exclamation point on the reality of where we are with the muni wireless trend - no more free lunch courtesy of the vendor community. What started off as a good idea, a marketing loss leader of building Philly's network for free because if was such a high-profile city in muni wireless at the time, created a Frankenstein as almost every city in America then wanted the same thing.
Over the years, the Internet Service Provider wars have left numerous competitors in the dust. One of the survivors is based in Atlanta and its stock is up on plans to restructure.
EarthLink (NASDAQ: ELNK) provides Internet access and communications services to individuals and business customers in the United States. Offerings include narrowband access, DSL broadband access, municipal wireless broadband, voice over Internet protocol telephone service, and Web hosting. The company has over five million subscribers. Competitors include AT&T (NYSE: T) and Microsoft (NASDAQ: MSFT).
The company surprised investors earlier in the week, when it announced that it will cut about 900 jobs as part of a restructuring to reduce costs. Most of the $60-70 million in associated charges will be recognized in the third and fourth quarters. Also, the board added another $200 million to its authorized buyback program. Soleil and Janco Partners subsequently upgraded the issue to "buy".
The market is hot! Everything seems to be moving. After almost four years of a pretty non-volatile market, the recent volatility in the market has taken the interest of all traders. In a more volatile market one has to remember that a looser stop is absolutely necessary to avoid being shaken out of positions. While the risk is greater, in a volatile market return potential increases as well.
Several of my recent ideas remain around the opening price while others have been doing very well. However, I have to attribute some of these quick gains to general optimism from the market today. Because I have been very bullish on a variety of momentum names, these shoot up quickly on days like Wednesday. But it's a double-sided sword -- when the market gets hit, these things get hit harder. I believe that if proper risk controls are in place, most importantly a stop-loss, then trading these names is a much more lucrative game than gaming normal stocks.
Most of my ideas these days are technically-oriented and there's a pretty simple explanation for this: the market isn't cheap enough to turn up tons of value investments -- my primary fundamental-based investments. While I've managed turn to up a couple value ideas, most notably Earthlink (NASDAQ: ELNK) here, I've also managed to turn up several growth-based fundamental ideas such as American Science & Engineering (NASDAQ: ASEI) (which reported great earnings the other day) here.
It's tough to get a feel for the status of the government-sponsored WiFi project in San Francisco.
Interestingly enough, the city has actually submitted a ballot that asks: do you want free wireless access?
Hmmm......
As far as I know, Earthlink (NASDAQ: ELNK) is going to provide the infrastructure. There is also supposed to be advertising monetization from Google (NASDAQ: GOOG).
"First, asking people if they want free wireless in a measure that has no binding power is like asking a room full of 17-year old guys if they'd like a date with Angelina Jolie. Not only are you wasting resources asking a question with an obvious result, you're pandering to a desire for something not likely to happen.
"The upside to this exercise is that the resulting publicity should deep-six this fantasy of the 'free' muni network in whatever pockets of America that still believe. This is a good thing. Almost every article that covers this election is going to point out that vendors in the industry have decidedly turned thumbs down on freebies.
"What you should see happening as a result is that cities will start to seriously look at viable business models, if they aren't doing so already. With luck, they'll look at San Francisco's 3-year ordeal and learn some lessons on how to avoid a similar fate. Since Philadelphia is slowly coming online with its network and low income folks there are receiving bundles with hardware, training and highspeed access, EarthLink would do well to trumpet this success story at every opportunity to counter the painful experience with San Francisco." Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.
For broadband providers such as Charter Communications (NASDAQ: CHTR), EarthLink (NASDAQ: ELNK), Time Warner Cable (NYSE: TWC), and Virgin Media, its necessary to have a portal. However, it's not cheap to build this technology -- or keep up with the latest innovations.
Well, it's a big opportunity for Synacor, which has a turnkey portal platform. And now the company plans to go public.
Synacor's system is highly flexible. A customer can allow for subscriber personalization, video, premium services, and so on. There are also extensive relationships with content providers, like CNN, CinemaNow, Fox Sports Interactive Media, MLB Advanced Media, and NASCAR.
The business model includes subscriber-based revenues as well as search monetization, which involves a deal with Google (NASDAQ: GOOG). From 2004 to 2006, revenues increased from $2.3 million to $26 million. Although, there was a loss of $2.2 million last year.
The lead underwriters on the IPO include Deutsche Bank Securities and Bear Stearns (NYSE: BSC). The proposed ticker symbol is SYNC. You can find the prospectus on the SEC website. Also, check out more recent IPO filings.
Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.
Amazon has been what Wall Streeters call a "stalled-story". That means the company took most of 2004-2006 to build very expensive infrastructure and spent heavily on heavy marketing expenses to acquire customers. This spending spree took the winds out of Amazon's sails for those three years. Earnings growth, visibility and momentum suffered as did the share price.
Throughout the rest of the post, Georges explains the very interesting growth long-term growth story in Amazon, as he responds to my recent post about the short-term price action I expect in Amazon.
I believe this entire situation is a perfect example of two things: 1) How a mindset going into a position can affect what the investor is looking for; and 2) How two different people, with different perspectives, can potentially be right about a stock.
I've noted the different mindsets between going into a trade and going into an investment before on BloggingStocks. Something like Earthlink (NASDAQ: ELNK) would be an investment, while something like PF Chang's (NASDAQ: PFCB) or Google (NASDAQ: GOOG), would be pure trades, meaning there's no intent to hold the stock. PF Chang's trade I've discusses was event-driven with the belief that the company would cut guidance, which it did. Google's was a sentiment play due to the belief that stockholders would get nervous with the company's performance, and so far it seems they have.
It's important that people remember this concept because oftentimes when I have a thought on a trade it could be different from my long-term view of a stock.
FT.com reports that Liberty Media Corp (NASDAQ: LCAPA) and EarthLink (NASDAQ: ELNK) may enter the bidding for AOL's dial-up internet access operation (which shares a parent, Time Warner (NYSE: TWX), with BloggingStocks). Liberty thinks its advantage is its ability to do a "tax efficient transaction."
The 
I've seen it many times: a cool product that finds few customers. That seems to be the case with .gif){kind=logo}
This week, .gif){kind=logo}
.gif){kind=logo}
This week, 
With the massive restructuring at 
It's tough to get a feel for the status of the government-sponsored WiFi project in San Francisco. 
For broadband providers such as 
Best & Worst in Money 2008: Most shocking financial collapse
Closing Bell: Stocks slump as AMD, AT&T, GM and Merck decline
Global Q&A: A rocky road, but profits ahead
