ZD Inc., Ziff-Davis (ZD) Message Board

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Technology Stocks : ZD Inc., Ziff-Davis (ZD)

ZD 35.22

-1.0%

Dec 5 9:30 AM EST

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To: CJ who wrote (448)	3/9/1999 10:17:00 PM
From: Maverick	of 855

ML has high regard for ZD's ComputerShopper.com Newspaper stocks appear inexpensive trading at just over 8X ‘99E EBITDA (and perhaps an even lower multiple if we end up raising our estimates) and just over 7X ‘00E EBITDA (where we are not as confident of being too low). Historically, this group has traded at 6-8X forward looking cash flow and during brief periods, most recently 1997 to first half 1998, the group has traded upwards to 9-10X EBITDA. Free cash flow is still flowing nicely and being used aggressively to repurchase shares in many cases. As a result, we think there is little risk in newspaper stocks. So, taking this to its theoretical limit, newspapers will likely be able to charge for on-line classifieds but will have to charge a lot less than they do in print. If all classifieds migrate on-line, newspapers can save some newsprint and not fully lose out but it is clear that even by winning market share they do lose somewhat. A good example is over at Ziff-Davis, we believe. Computer Shopper is an excellent publication as it mostly consists of ads for computers. Consumers buy this publication when they are thinking of purchasing a computer. Now consumers can go on-line to ZDNet.com and find the same ads and an ability to get additional information and eventually link to the direct seller and buy the computer. Ziff offers both services, but the economic losses of print ads are not being made up for bottom line despite the rapid gain of on-line revenues.

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