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Strategies & Market Trends : Value Investing

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To: gcrispin who wrote (27837)	10/20/2007 8:13:17 PM
From: gcrispin	Read Replies (1) of 78715

I sold my MGI and took the proceeds to purchase more WU. After listening to the MGI CC, their earnings were great, but Fitch downgraded them over concerns of the sub-prime mortgages. What bothered me from the CC is that they have maxed out their credit lines. marketwatch.com One of the major concerns in the money transfer business is that it will be circumvented using cell phones. Also on Friday, WU issued a press release concerning their agreement with GSM providers. reuters.com Pricing will be the key issue here. But it looks like WU is positioning itself to gain market share in what still is a fragmented industry. Furthermore another agreement was reached with Google as reported in Barrons a few weeks ago. Below is the article. THERE ARE TWO MAIN knocks on Western Union (WU), neither one new. The first is that a federal immigration crackdown will crimp money transfers back home from foreign-born U.S. residents. The other is that emerging online and cellphone payment technologies will eat into volumes on its transfer-agent network. An unpublicized deal for Google to pay for Western Union money transfers for its AdSense members in nine South American and Asian countries (including China) argues against the latter concern. Quietly, Google has begun offering the Western Union payment option to owners of Websites sharing in Google ad revenue, who typically are paid with checks that can be lost or stolen. Though the financial impact of the effort is unclear for Western Union, this represents incremental business in a fast-growing segment not now built into Street assumptions. Even though WU has over 270,000 agents in over 200 countries, it only has a 15% market share in a fragmented market. I believe that it is concolidating its position by building partnerships with other technological threats to the money transfer business. With its $1 billion in annual operating cash flow the company will be able to reduce its $3.5 billion in debt and repurchase stock.

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