At $18 1/8. Profits at Multex.com Buck Web's Conventional Wisdom
By PETER EDMONSTON
WSJ.COM
Multex.com Inc., which provides Internet technology to some of Wall Street's biggest brokerage firms, Thursday turned in its second profitable quarter and forecast more of the same. The results counter conventional wisdom that the Web and making money are mutually exclusive.
Multex posted net income of $1.8 million, or six cents a share, for the just-completed quarter. That compares with a year-earlier loss of $8.5 million, or 31 cents a share. Revenue more than doubled to $27.9 million.
The latest earnings were a penny a share better than Wall Street expected, according to Multex, which aims to challenge First Call/Thomson Financial in tracking analysts' earnings estimates. Indeed, the fact that Multex has profits at all is noteworthy when well-known Internet companies such as Amazon.com Inc. and WebMD Corp. are still struggling with red ink. Meanwhile, scores of dot-com start-ups have folded without ever turning profits.
Analysts say more significant than Multex's back-to-back profits is its forecast of more to come. The New York-based company, which went public two years ago, told analysts Thursday that it expects a profit of $23.5 million to $25.5 million for the current year, which amounts to 65 cents to 71 cents a share in 2001, based on 36 million shares outstanding. That range was in line with analysts' mean estimate of 67 cents a share, as tallied by Multex.com.
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Dain Rauscher Wessels analyst Jon Arfstrom, speaking at the Multex conference call, said the profit outlook "clears things up and should help the stock."
Greg Smith, who covers Multex for J.P. Morgan H&Q, said "a cloud of uncertainty was lifted" by Thursday's earnings outlook.
Separately, the company also announced an agreement to build and host an online investment-research area for American Express Co., adding another blue-chip name to a roster that now includes Merrill Lynch & Co., Morgan Stanley Dean Witter & Co. and Salomon Smith Barney, a unit of Citigroup Inc.
"These guys have found a model that works," says Scott Appleby, an analyst from Robertson Stephens. He has a "buy" rating on Multex's stock.
Multex's first profit came in the third quarter of 2000, when the company earned $210,000, or a penny a share, on revenue of $22.8 million.
A big part of Multex's revenue growth comes from its Web-building and hosting business, called MultexExpress. Revenue from that unit accounted for 40% of Multex's fourth-quarter revenue, up from just 23% a year earlier.
Multex was founded as Multex Systems Inc. in 1993, when its core product was technology for delivering stock research to institutional investors. The company switched to an Internet-based delivery system in 1996, changed its name to Multex.com in early 1999, and held its IPO in March of that year.
Multex has since branched out into Web-hosting, signing deals in the recent quarter to create sites for Merrill Lynch HSBC, a joint venture of Merrill Lynch and HSBC Holdings PLC, ING Group's Baring Asset Management Ltd. and Germany's HypoVereinsbank, among others.
Multex also won a contract last year to build and host TheMarkets.com, a Web portal that a consortium of nine prominent brokerage firms will use to deliver research and economic data to institutional investors.
This spate of new contracts brings to 130 the number of Web sites hosted by Multex.com, the company said.
Of course, there are other profitable Internet companies besides Multex, most notably, online auctioneer eBay Inc. and Yahoo! Inc., a provider of online content and services. But more often, Internet outfits have found profits elusive, especially online retailers and others catering to consumers rather than businesses.
John McGovern, the company's chief financial officer, argues that Multex isn't an Internet company in the conventional sense. "This happens to be a good financial business that uses the Internet as its means of communications," Mr. McGovern said.
Multex derives a small part of its revenue from its consumer-based products. For example, its Multex Investor Web site allows individual investors to sign up to receive free stock research.
But the company is primarily a business-to-business concern, selling technology used to distribute financial data and research on the Internet. For a while, Wall Street hoped that so-called B-to-B companies wouldn't be vulnerable to the forces that roiled the consumer Internet sector, such as a drop in advertising revenue and a plateau among e-tailers.
But these once-beloved B-to-Bs have taken a beating as well. Internet service and software companies such as MarchFIRST Inc. and Ariba Inc. have seen their stock prices drop sharply amid fears that corporations won't spend as lavishly on technology this year as last year.
Multex's shares have suffered as well, falling from a high of $38 in late March to as low as $7.88 in November. At 4 p.m. Thursday, Multex stock closed up 25 cents to $16.38.
Mr. Appleby still worries that Multex could get squeezed by corporate belt-tightening. "What we know is that [information technology] is getting cut across the board on Wall Street," he says. "And Multex is an IT-services outfit."
Multex Chairman and Chief Executive Officer Isaak Karaev, responding to Mr. Appleby's concerns, told analysts that lean times may actually work to Multex's advantage, as more Wall Street firms seek to outsource their information-technology needs.
And despite the prevailing Internet gloom, the dot-com in Multex's name isn't necessarily a liability, says the company's Mr. McGovern. "We actually have that debate here daily," he says. "But we figure what comes around goes around, so we're sticking with it."
From wsj.com heard on the street
Good quarter up 80% in 2 months.
Jack |
