I agree. When I read the news release this morning (before the market opened), I figured that the two companies would both jump $4-5 a piece. It's clear that there still is a fair amount of skepticism about these two outfits, although my stock in NTKI is roughly triple what I bought it for just in October, so I can hardly complain too fiercely.
N2K's last quarterly EPS numbers were pathetic, though, and CDNWs weren't much to write home about, either, and I suspect that concern is going to hold the stock price back (at least from the ethereal levels of other internet stocks) until the problem is solved.
Here's some evidence of that, taken from some outfit that comments on internet stocks called "The Perry Group:"
"CDNow -- $20.75 (Nasdaq: CDNW - news; b)
CDNow, which is acquiring N2K (NTKI) originally appeared on our Summer Watch and now moves to our Internet/Music Watch List. We may be dreaming, but we believe the combined company gets bought out. What they have going for them is an established presence. What they don't have and what we can't envision them having (with their current marketing and pricing habits) is profitability. The street is expecting them to lose $2.84 this year and $2.91 next year. Sales for nine months were $35 million vs. $9 million. It has a $376 millionmarketcap.com Pure Internet Play. Half of its high, triple its low. 215-619-9900. Web Site: cdnow.com;
It wouldn't kill me if the combined company were bought out by Time/Warner, etc. I will admit to some skepticism the way that management of both companies "whores out" (sorry) their cd's with incentives and discounts up the wazoo. While that's a great introduction to the company, it doesn't contribute much to the bottom line. Yeah, I know all the arguments about internet companies not being profitable immediately, etc., but when a company like N2K runs up huge EPS losses (wasn't the last one in excess of $5?), it has to give you a little pause.
Still, I'm very long NTKI, and am looking forward eagerly to the combined company. If it gets bought out, then so much the better. |
