An analysis of BNYN assigns a possible valuation in excess of $1 billion to SWBD:
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Stock of the Day
Dec 17, 1999
Banyan Systems: Sum of the Internet Parts
By David Peltier and Dave Sterman (12/17/99)
Shares of Banyan Systems (NASDAQ:BNYN - news) have quietly doubled over the last two months to Thursday?s closing price of $15.31.
About one-third of this run came as a direct result of the company's holdings in Software.com (NASDAQ:SWCM - news) , a developer and provider of scalable, high performance messaging software applications for providers of Internet communications and services. Banyan owns just over one million shares, for nearly 30% of its total value.
Software.com lost $7.63 on Thursday to close at $93.50.
But off the radar, investors have also been buzzing about the company?s 53% stake in Switchboard.com, which looks poised to do a white-hot initial public offering. The unit filed an S-1 registration statement with the Securities and Exchange Commission (SEC) on November 1 and could come public as soon as January or February.
Switchboard offers searches of its virtual phone books and e-mail directories. Switchboard.com attracted approximately three million unique visitors in September 199,9 according to Media Metrix.
Online directories are increasingly taking the place of traditional phone and address directories. These directories can provide quicker results and can extend beyond limited geographic boundaries. Switchboard is developing targeted packages designed to attract vertical content providers that can enhance their sites by offering specialized directories of local merchants in categories relating to their content.
Switchboard sputtered for a few quarters after a deal with America Online (NYSE:AOL - news) soured, but has been able to turn things around once again. Page view growth has been expanding quickly.
And with the backing of CBS (NYSE:CBS - news) , which has a 35% pre-offering stake, Switchboard will get plenty of plugs through CBS? media outlets.
Though a number of small outfits offer similar services on the web, Switchboard.com is a close second to Infospace.com (NASDAQ:INSP - news) in terms of traffic and registered users. Infospace, by the way, sports an $8 billion market cap.
Even if Switchboard merits a smaller deal price, many think it could be valued north of $1 billion in post-IPO trading.
In contrast, Banyan?s market value is less than $400 million.
Given the value of those two stakes and Banyan?s current stock price, the Street has not factored the remaining core business into the share price. While the business has had rough moments, it still remains quite attractive.
Banyan is currently phasing out its traditional network software business to devote more resources to its faster growing units. Banyan's network operating systems have been out-manned by the likes of Novell (NASDAQ:NOVL - news) and Microsoft (NASDAQ:MSFT - news) . A business that accounted for 57% of sales last year should fall to below 10% of total revenue in 2000.
After the Switchboard IPO Banyan will be able to devote all of its efforts to Network Servicing, another segment growing by leaps and bounds. A look at year-over-year operating figures for Banyan is useless because of the impact from the software business? deteriorating results.
Bottom Line:
During 2000, Banyan should post perkier operating results. In addition, the cash raised from the sale of its stakes in Software.com and Switchboard.com will let the company buy back massive amounts of stock. |
