Mike, I know you saw this in Abelson's column. There has got to be some way to play this overblown crap. My ISP, Earthlink (who are beginning to tick me off with busy signals), is also in the same valuation stratosphere. Hell, they are basically money-losing commodity companies without pricing power and customers with the loyalty of Linda Tripp......
We've long thought that in terms of valuation, online was way off base. Would any sentient businessman pay $24 billion for America Online, whose latest 12-month sales weighed in at $2.6 billion? Would any businessman of sound mind pay nearly $1 billion for MindSpring, with annual revenues of $78 million? But that's what the stock market says they're respectively worth.
This month, as it happens, the two companies did a deal. AOL sold an internet provider called Sprynet -- lock, stock and eyeballs (read: facilities, customer support and 180,000 subscribers) -- to MindSpring. We stumbled upon the transaction via Will Lyons, who puts out a newsletter called Short On Value. Will, it should be noted, thinks both stocks are overpriced, but his numbers speak for themselves.
MindSpring will pay between $35 million and $45 million for the 180,000 Sprynet subscribers, depending on how many it retains after the sale. That works out to between $194 and $250 a subscriber.
By comparison, the stock market is valuing America Online's 14.4 million subscribers at $1,685 each.
And it's placing a value of $960 million, or $1,675 each, on MindSpring's 573,000 subscribers (assuming all the 180,000 Sprynet folks move over).
Granted, AOL and MindSpring subscribers might rate a premium. But six times the Sprynet subscribers? Come on.
John |
