Thank-you, Thank-you very much.
May I have the microphone...
Today reminds me of the frog who was eaten by an eagle. The little guy was so determined to find a way out that he began crawling his way back, through the eagle. Pretty soon, he poked his head out its end. When he saw they were flying high in the sky, the little frog turns to the eagle and asks, "Hey! eagle, how high do you think we are?"
The eagle, looking back at the frog, said, "Oh, about a mile."
The frog, gathered himself together and then asked the eagle, "About a mile (gulp), you wouldn't shit me now would you?" <ggg>
Like the little frog, I'm flying high with my Venerable title wondering if the eagle is going to shit me.
But first, once again, I'd like to thank Messagemedia for delivering record earnings. To put this effort in perspective, I'd like to ask how many yahoos doubled their portfolios the last quarter. pause... Come on, don't be bashful. I don't see any hands. pause... I believe most agree, doubling revenues in three short months, is no easy feat.
Second, I'd like to say I owe much of my success in analysis to my ability to scare off competition.
I've read today's earning report #reply-11699808 and listened to the conference call. For the most part, they put my concerns to rest.
One of my concerns was goodwill amortization of Revnet and Decisive. The problem with buying privately held companies is valuation, there is no market cap to assist in this matter. Considering Messagemedia paid $81.4 million for these two companies and that 40% premiums and higher are not uncommon for tech companies, I was expecting a much greater amortization of goodwill. After all, Convergence Partners was touting their flipping of Decisive Technology not to long ago #reply-11674155. As it is, these two companies were procured with less than 7% goodwill. Goodwill often relates management mindset to shareholder value. For the time, I'm satisfied with this point.
Another of my concerns was financing. My broker knew right away who Garrett Van Wagoner was and the performance of his funds. Next to Softbank, we probably could not have gotten better financial backing -- at least for the next six quarters. You understand, I'm talking as a survivor (several times over) of the "ye ole" floorless convertible and ensuing death spiral.
However, all is not a bed of roses. As I listened to Jones explain Messagemedia, I quickly realized, I wasn't understanding what he was saying. I'll take this one step further and say most investors do not understand the business of Messagemedia. This my friends, is the number one problem Messagemedia faces in the coming months.
In effect, there is a schism between Messagemedia and investor understanding of the company. To make matters worse, Jones isn't helping to bridge the gap.
Before the conference call, I posed two simple questions, even emailed them to investor relations at Messagemedia. They were, 1) How many messages/day does Messagemedia serve, and 2) Who are their three largest clients.
Recall, the representative of Robertson Stephens tried to get at how many messages per day were being served. Jones gave an answer I doubt anyone understood. If all this other stuff they are doing is more important, fine, give us the number of messages per day and get on with the more important stuff. I use this as an example to highlight the disconnect between investors and management. Neither understands the other.
There is nothing magical about that number. Come next month it will be obsolete, or it better be. Who knows, it might even scare the competition. Investors like milestones, compare ratios, etc. in their evaluation of company performance. As it is, the only number we have to evaluate Messagemedia is total revenues. Frankly, that provides very little information about the inner workings and asks investors to take a lot for granted. Instead of clarity, we got confusion. This doesn't work!
I felt sorry for the poor fellow who asked the question, he had just congratulated Jones for a fine performance and his firm, Robertson Stephens, had helped Messagemedia put together $42 million in financing but Jones shat the frog. This is one of the reasons I don't participate in conference calls #reply-11650260. I would have shown some attitude.
Then there is the question of the top three clients. Messagemedia has filed an 8-K that states...
"WE RELY ON A FEW CUSTOMERS FOR A SIGNIFICANT PORTION OF OUR REVENUE"
see... sec.gov
As investors, we have a right to know with whom the risk lies. This is a fair question. Instead, they kept referring to the top ten which I assume are included in this list #reply-11637861. Considering they announced few contracts during Q3 yet doubled earnings, their top three customers are obviously making a significant contribution.
What's that? My time is up!
OK, I just want to say something that every yahooey is sure to understand. Did anyone catch the firm of the guy who asked the last question? Before I mention it, I'll point out none of these onlookers were asking question at the Q2. Oh ya, he said he was with Prudential.
One more thing. Recall when I said we only had one number to measure company performance, well I was wrong. There's another. It's cost of revenues. What I'd like to do is ask management, when they drive to work in the mornings, that they think about cost of revenues and not market cap. It's another of those little things that relates mindset and shareholder value. If you know what I mean.
I'd like thank you all for reading this far down the page and hope to see here again at the Q4 guess-off. Remember, if you don't guess you can't win.
Best Regards and all that...
The Venerable Dan Meckenstock |
