Don & John-
Apparently, only $25 million of the $40-45 million loss is due to asset write-offs and adjustments. That means that the company's business has lost nearly $20 million this past year. NM had $3.5 million in income through Q3, so it looks like Q4 was a disaster, as they seemingly lost at least $20 million in Q4 operations. That's worse than .75 per share. We'll probably see a Q4 net loss of 1.75 per share.
It's possible that we'll have some more insight in 2 weeks as to the potential takeover. But Safeguard may wait until NM can report a good quarter or two, before they auction it. Assuming NM had a good Q1 and has a good Q2, we might need to wait until October. With NM's price this low, it may be smarter to buy the stock than the options. Although NM did hold its support at $5.375 (previous 52-wk low) this morning, it might be a good idea to wait before putting any more money into the stock. If you want to do options, buying a put with a strike at $5 may be the best move. After all, that will provide some protection if the damn stock falls below $5.
As far as potential bidders, there's another reason I believe that CUC is the best. Unlike the other 3 companies, which would likely want NM to bolster their home shopping businesses, CUC doesn't need that. In my opinion, the benefits that News, Comcast & HSN see in NM would be a bonus to CUC. It shouldn't matter to CUC if NM is having lousy business results. As I explained previously, CUC would find the infrastructure of NM's business more valuable than its actual business. The value to CUC is the distribution capabilities, customer list and market penetration that NM has cultivated. This is the reason that I believe that CUC would be willing to pay more than the other companies. It is also the reason that CUC may not care if NM is profitable or not. However, I'm fairly certain that the company will sell for a higher price if it can turn a profit. I have no idea if they will.
You were wondering how I find the information upon which I base my analysis? I get my information by doing lots of research. I read SEC filings from various companies, industry commentary and research, conversations with management of different companies, company news, rumors, an analytical imagination and a healthy willingness to speculate.
I don't know a whole lot about the infomercial industry, but I know a lot about CUC's business and how it could benefit significantly from the acquisition of NM. I also understand the relationship between marketing, consumer services/products and broadcasting. That's why I believe that CUC could derive a lot more value from NM than could the other "interested parties."
In the meantime, we wait...
Todd |
