Steve,
Welcome to the thread. Good questions.
TLC is well positioned for Christmas with it's launch of new titles rolling out and the broderbund is back campaign.
In no way is the quarter fully priced in at these levels. The stock trades at a significant discount to it's intrinsic worth for many reasons.
As the investment community becomes more fully aware of TLC's market dominance and future prospects the valuation can expand. Good execution in the December quarter will be another datapoint. As you can see, TLC has some pretty violent detractors predicting the company's demise. Paul Richards has put an amusingly negative spin on every piece of news he could and has been predicting disappointing financial results since the beginning of time.
At least since I have been following the story, TLC has made numerous accretive acquisitions, become the gorilla in the market and met or exceeded projections every quarter.
In the current quarter, I don't think the investment community is remotely aware of how successful the launch of shoptlc.com has been. In addition, the company was forced to keep open a broderbund manufacturing facility for longer than anticipated to keep up with demand.
The charts are interesting, but I'm not paying much attention to them since they only indicate stock direction without some form of an external catalyst. There can be catalysts for revaluation at any time so I'm not writing covered calls at this point.
Acquisitions and mergers. I think TLC will continue to buy or build partnerships when opportunity strikes. As the now dominant vendor, they are the most attractive partner for distribution. Now TLC can make acquisitions and by quickly leveraging its development and distribution prowess can create deals that are quickly accretive.
There aren't many more "giant" deals like broderbund left. However, there are plenty of characters and content that would make attractive partnership and licensing deals.
I think that numerous companies would find TLC an attractive acquisition candidate. I think the issue is less which company wants tlc to be part of and more how much the acquiring company could afford to pay. In addition to the companies you mention I think that numerous media, computer and internet companies would find significant value in TLC's franchises. However, given the normal takeover premiums of 30% to 60% over trailing 20 day stock price, I'm not sure I'd jump up and down with excitement over a takeover at this point.
I view the company as a core holding and am content to trade around my core position and
In addition to the company's internal strengths in franchise control and distribution, TLC holders are benefiting from several major demographic forces:
1) declining PC prices and increased PC household penetration.
2) The increasing population of young children through at least 2008
3) increasing acceptance of the PC as an instrument for education and personal productivity.
Next we'll see the power of TLC's business model as it transitions to leveraging the internet as a vehicle, first for distributing its product at much higher margins and then for creating live communities of its users and benefiting from the ownership of the content and more continuous interaction with its customer base.
TD |
