Just kiddin' around with ya, Pru. More on BCST valuation:
P/S ratios not a terribly useful measure of valuation for the Nets. More a contrivance in the wake of way early IPOs and virtually uniform absence of earnings. (Whatever happened to IPOs requiring 2-3 years of demonstrable profitability?!) P/S ratios become distorted in a hyper-growth environment. When a firm's revenues can increase by 25 percent sequentially (quarter-to-quarter), and when some firms try to acquire a new property each quarter (GNET's model), P/S ratios tend to produce junk data. And how do you compare a P/S of 75 with a P/S of 150? What does that actually *mean*?!
Perhaps the all-time classic illustration of the fallacy of P/S ratios is the story of hyper-growth instant messenger, ICQ. Last Spring, AOL acquired ICQ's developer, Mirabilis (a private company) for, I believe, $287mm, plus some upside based on growth, for a total commitment exceeding $320mm. At the time, ICQ had virtually no revenues and (gasp!) no aggressive plans to create any. Profitability? How about surging losses! Its sole focus was to build a vast, global community of instant messaging participants. At the time of its acquisition, Mirabilis/ICQ might have had 13mm users. Today, it has well over 30mm users. CNET lists ICQ downloads at 43.4mm and counting. So it looks like AOL bought into a mother lode of eyeballs for pocket change. Extraordinarily shrewd.
Analyst Steve Harmon's use of *per subscriber* or *per visitor* valuation models a much better approach. He borrows this scheme from his background in cable TV, cellular and paging analysis. These industries tend to show operating losses and participants often turn over; thus, valuations result from calculation of a price "per head." Comparables are relatively easy to work out.
For those who haven't seen it, here's Steve Harmons recent valuation report on BCST. His math suggests a price per share of about $138.44. At this market cap, and based on BCST's last-reported (and now-obsolete) unique daily visitor count, Harmon concludes that YHOO could acquire BCST at *half* the market cap value of its own user base. My own take is that YHOO or someone else would pay *more* per subscriber; thus, Harmon's valuation could be low.
internetnews.com
Sorry about your Buckeyes, Pru.
Why not suggest to some growth-oriented clients that buying BCST at these levels is a way to get into AOL, YHOO or *somebody* at a discount? Sort of a pre-arbitrage play, if you will.
BAM |
