DJIA 7968.78 +30.64 (+0.39%) S&P 500 1005.53 +10.73 (+1.08%) Nasdaq 1540.97 +31.52 (+2.09%) Value Line ndx 746.89 +8.69 (+1.18%) 30-Year Bond 107 10/3 +1 1/32 5.02% Yield
Drugmaker Pfizer <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PFE)") else Response.Write("(NYSE: PFE)") end if %> picked up $8 5/8 to $96 1/8 after falling to $87 1/2 in after hours trading yesterday as the market digested the company's fiscal Q3 earnings results. Pfizer's earnings for the quarter came in at $0.51 per share, which was up from $0.45 per share a year ago but $0.06 per share below the Street's mean estimate. Throughout the day, analysts began to dismiss fears that the sky was falling on Pfizer, saying the earnings shortfall could be attributed to the company gearing up to launch new products. Perhaps the most promising new drug on the radar screen is Celebra, which is the first of a new kind of painkilling drug called a Cox-II inhibitor. Pfizer will market the drug under an agreement with Monsanto <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MTC)") else Response.Write("(NYSE: MTC)") end if %>, which announced today that an FDA advisory panel plans to review its application for Celebra sometime in December.
Microcontrollers and embedded control products maker Microchip Technology <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MCHP)") else Response.Write("(Nasdaq: MCHP)") end if %> moved up $2 13/16 to $24 1/8 after reporting fiscal Q2 EPS of $0.33 versus $0.34 a year ago, matching analysts' estimates. Microchip CFO Philip Chapman told the Motley Fool that some of today's rise could be attributed to short-covering, as the earnings report dissipated some of the negative rumors that had hurt Microchip's share price of late. While Chapman expects the overall market for microcontrollers to be down 10% this year, Microchip's business will be up, allowing it to gain market share. "I don't know [whether] anyone else out there can say that," he said. Microchip's microcontroller market share is expected to rise to 9% to 10% this year from 8.5% last year, while industry-leader Motorola <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MOT)") else Response.Write("(NYSE: MOT)") end if %> will see its share reduced by a few percentage points to 19% or 20%, according to Chapman.
QUICK TAKES: Specialty insurer American Bankers Insurance Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ABI)") else Response.Write("(NYSE: ABI)") end if %> gained $2 1/2 to $38 after agreeing to call off its proposed merger with consumer services company Cendant <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CD)") else Response.Write("(NYSE: CD)") end if %>. More details on the breakup are available in this morning's Breakfast With the Fool... Automaker Ford Motor Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: F)") else Response.Write("(NYSE: F)") end if %> motored ahead $1 3/4 to $45 13/16 after reporting fiscal Q3 EPS of $0.80 versus $0.73 last year, which was adjusted to exclude earnings from its since spun-off Associates First Capital unit. The results were in line with the Street's expectations... Speaking of Associates First Capital <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AFS)") else Response.Write("(NYSE: AFS)") end if %>, the finance company jumped another $3 11/16 to $64 9/16 after reporting fiscal Q3 EPS of $0.91 yesterday, matching the Street's mean estimate.
Pharmaceutical company King Pharmaceuticals <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: KING)") else Response.Write("(Nasdaq: KING)") end if %> was crowned with a $4 3/16 gain to $15 1/8 after saying its fiscal Q3 revenues and earnings will be higher than last year's results, resulting in EPS above analysts' forecasts of $0.21... High-performance bicycle maker Cannondale Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BIKE)") else Response.Write("(Nasdaq: BIKE)") end if %> shot $1 7/8 higher to $9 1/2 after saying that due to strong demand for its products, fiscal Q1 earnings will be at the high end of the range forecasted by analysts... Online development services firm USWeb Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: USWB)") else Response.Write("(Nasdaq: USWB)") end if %> rose $2 9/16 to $11 5/16 after reporting fiscal Q3 EPS of $0.02 (excluding acquisition-related charges), beating the Street's mean estimate of a $0.01 per share loss for the quarter.
Healthcare management software developer QuadraMed Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: QMDC)") else Response.Write("(Nasdaq: QMDC)") end if %> climbed $2 1/2 to $20 3/4 after saying strong demand for its coding and compliance products resulted in a record number of contract signings in fiscal Q3... Investment bank and brokerage firm Morgan Stanley Dean Witter <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MWD)") else Response.Write("(NYSE: MWD)") end if %> gained $1 3/4 to $48 9/16 after its Wall Street counterpart Brown Brothers Harriman raised its near-term rating to "buy" from "neutral"... Number-one PC maker Compaq Computer <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CPQ)") else Response.Write("(NYSE: CPQ)") end if %> tacked on $1 to $25 1/2 after reporting fiscal Q3 EPS of $0.07 versus $0.34 (pro forma) last year, which beat the Street's mean estimate by a penny... Wide area networking (WAN) products designer Ascend Communications <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ASND)") else Response.Write("(Nasdaq: ASND)") end if %> ascended $1 13/16 to $42 15/16 after its proposed merger with Stratus Computer <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SRA)") else Response.Write("(NYSE: SRA)") end if %> was cleared by U.S. antitrust regulators.
Internet portal company Excite Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: XCIT)") else Response.Write("(Nasdaq: XCIT)") end if %> moved up $1 11/16 to $34 5/8 after the company finalized its joint venture agreement for an Italian version of Excite with Telecom Italia <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TI)") else Response.Write("(NYSE: TI)") end if %>. Telecom Italia's American depositary shares rose $6 9/16 to $68... Consumer credit products direct marketer Metris Companies <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MTRS)") else Response.Write("(Nasdaq: MTRS)") end if %> added $2 9/16 to $31 1/16 after reporting fiscal Q3 EPS of $0.85 versus $0.52 a year ago, beating the Street's mean estimate by a nickel... Infection prevention and surgical support products supplier Steris Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: STRL)") else Response.Write("(Nasdaq: STRL)") end if %> gained $1 3/4 to $22 3/4 after the company said it is comfortable with the First Call mean earnings estimate of $0.27 per share for Q2 and $1.14 per share for fiscal 1999.
Earnings Movers
Adtran Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ADTN)") else Response.Write("(Nasdaq: ADTN)") end if %> up $1 1/8 to $21 7/8; Q3 EPS: $0.29 vs. $0.28 last year; Estimate: $0.28
Advent Software <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ADVS)") else Response.Write("(Nasdaq: ADVS)") end if %> up $2 1/8 to $23; Q3 EPS: $0.35 vs. $0.25 last year; Estimate: $0.34
Alpha Industries <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AHAA)") else Response.Write("(Nasdaq: AHAA)") end if %> up $2 3/4 to $14; Q2 EPS: $0.39 vs. $0.22 last year; Estimate: $0.38
Arvin Industries <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ARV)") else Response.Write("(NYSE: ARV)") end if %> up $2 13/16 to $34 1/2; Q3 operating EPS: $0.69 vs. $0.58 last year; Estimate: $0.66
General Cable Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GCN)") else Response.Write("(NYSE: GCN)") end if %> up $1 3/4 to $16 7/8; Q3 EPS: $0.59 vs. $0.46 last year; Estimate: $0.57
Linear Technology Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: LLTC)") else Response.Write("(Nasdaq: LLTC)") end if %> up $3 7/16 to $50 3/8; Q1 EPS: $0.56 vs. $0.51; Estimate: $0.54
Plantronics Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PLT)") else Response.Write("(NYSE: PLT)") end if %> up $3 1/4 to $54 11/16; Q2 EPS: $0.74 vs. $0.51 last year; Estimate: $0.69
Providian Financial Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PVN)") else Response.Write("(NYSE: PVN)") end if %> up $4 5/16 to $67 5/16; Q3 EPS: $0.85 vs. $0.50 last year; Estimate: $0.81
Teradyne <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TER)") else Response.Write("(NYSE: TER)") end if %> up $3 to $23 Q3 EPS: $0.20 (before charges) vs. $0.45 last year; Estimate: $0.20
Time Warner <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TWX)") else Response.Write("(NYSE: TWX)") end if %> up $3 9/32 to $84 1/4; Q3 EPS: $0.06 loss vs. $0.20 loss last year; Estimate: $0.06 loss
The new BankAmerica Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BAC)") else Response.Write("(NYSE: BAC)") end if %>, created from the merger of BankAmerica and NationsBank, sank $5 7/8 to $48 1/16 after reporting Q3 "operating earnings" of $0.50 a share, about half of what it earned a year ago and lower than analysts' mean estimate of $0.90. But ongoing earnings for the quarter were actually far smaller than the "operating earnings" indicated, as the company took a pre-tax gain of $479 million related to the sale of Bank of America's manufactured home finance unit. Assuming a 35% tax rate, operating earnings were more like $581.6 million, or $0.33 per share. Adjusting net income for the substantial amount of goodwill amortization that the former NationsBank brings along (and B of A to a lesser extent), cash EPS for the quarter looked to be more around $0.42. With average shareholders equity per share over the course of the quarter, this results in a 6.5% return on equity, which explains the beating the stock took today in the market. For more on why the honeymoon is over at BankAmerica, see today's Fool Plate Special.
Color printer servers maker Splash Technology Holdings <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SPLH)") else Response.Write("(Nasdaq: SPLH)") end if %> belly flopped $6 1/16, or 46.2%, to $7 1/16 after reporting a 20% drop in third quarter earnings and warning that it expects fourth quarter operating results to decrease from a year ago. Splash, which makes servers that convert color copiers into computer printers and scanners, blamed its troubles on the continuing economic uncertainties in Asia, especially in economically challenged Japan -- sales to Asia plummeted 81%. The company reported Q3 EPS of $0.32, compared with $0.40 last year and the analysts' mean estimate of $0.30. BT Alex. Brown slashed its rating on the company to "market perform" from "strong buy," while Piper Jaffray downgraded Splash to "buy" from "strong buy." Piper Jaffray analyst Hany Nada said that roughly 10% of the company's business comes from Asia, down from nearly 50% a year ago. Nada cut his 1999 EPS estimate on the company by about 40% to $0.85 from $1.41.
QUICK CUTS: Apple Computer <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AAPL)") else Response.Write("(Nasdaq: AAPL)") end if %> dipped $1 3/8 to $37 3/8 after reporting fiscal Q4 EPS of $0.68, an improvement over last year's loss of $0.19 (before charges) and better than analysts' expectations of $0.49... Beverage and snack maker PepsiCo <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PEP)") else Response.Write("(NYSE: PEP)") end if %> fizzled for a $1 1/4 loss to $30 3/4 after reporting Q3 EPS of $0.37, up from $0.35 in the same prior-year period and short of analysts' expectations of $0.40. The company's net earnings of $0.50 a share were boosted by a $200 million, or $0.13 a share, tax credit... Intel <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: INTC)") else Response.Write("(Nasdaq: INTC)") end if %> finished down $1 to $82 9/16 despite yesterday reporting Q3 EPS of $0.89, slightly higher than last year's $0.88 and solidly above the $0.80 expected by analysts.
Life sciences company Monsanto <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MTC)") else Response.Write("(NYSE: MTC)") end if %> lost another $3 to $34 after yesterday scrapping its proposed merger with American Home Products <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AHP)") else Response.Write("(NYSE: AHP)") end if %> "by mutual consent"... Cambridge Technology Partners <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CATP)") else Response.Write("(Nasdaq: CATP)") end if %> tanked $4 5/16 to $15 1/16 after reporting Q3 EPS of $0.25 (before charges), up from $0.17in the same period last year and right in line with estimates. Including merger costs, the company earned $0.16 a share... Computer components maker SBS Technologies <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SBSE)") else Response.Write("(Nasdaq: SBSE)") end if %> plunged $8 3/8, or 47.2%, to $9 3/8 after late yesterday saying that its fiscal Q2 revenue and earnings likely will be flat with Q1. The company now expects fiscal 1999 EPS of $1.70 to $1.85 (before charges), modestly higher than the $1.64 it earned in fiscal 1998 and below analysts' expectations of $2.07.
Real estate research, investment, and operating management firm Security Capital <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SCZ.B)") else Response.Write("(NYSE: SCZ.B)") end if %> shed $1 13/16 to $12 7/16 after Goldman Sachs downgraded the company to "market perform" from "recommended list"... Enterprise resource planning software developer Platinum Software Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PSQL)") else Response.Write("(Nasdaq: PSQL)") end if %> dropped $2 3/16 to $5 15/16 after announcing it will acquire manufacturing software company DataWorks Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DWRX)") else Response.Write("(Nasdaq: DWRX)") end if %> in a stock swap that valued DataWorks at about $6.45 a share, a 20% premium to its closing price yesterday of $5 3/8. DataWorks was down $1 1/16 to $4 5/16.
Component and supply management software company Aspect Development <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ASDV)") else Response.Write("(Nasdaq: ASDV)") end if %> was ditched for a $3 1/2 loss to $17 7/8 on concern that its revenue growth may slow as companies defer orders to focus on the Year 2000 problem. Yesterday the company reported Q3 EPS of $0.13, up from a loss of $0.01 last year and beating analysts' mean estimate of $0.11... Consumer products direct seller Amway Asia Pacific <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AAP)") else Response.Write("(NYSE: AAP)") end if %> took a hit of $7/8 to $8 13/16 after announcing it has suspended its quarterly dividend "due to the decline in the performance in several key markets and the need for Amway China to retain its available cash for planned capital needs."
International Paper <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IP)") else Response.Write("(NYSE: IP)") end if %> fell $1 1/4 to $44 13/16 after Goldman Sachs downgraded the paper maker to "market perform" from "market outperform," and cut EPS estimates to $0.95 from $1.10 for 1998 and to $1.60 from $1.70 for 1999... ITT Educational Services <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ESI)") else Response.Write("(NYSE: ESI)") end if %> dropped $2 1/16 to $25 1/4 after 35% shareholder Starwood Hotels & Resorts <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HOT)") else Response.Write("(NYSE: HOT)") end if %> said it's looking for ways to sell its interest in the trade-school operator to focus on its hotels and casinos.
Earnings Movers
Analysts International Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ANLY)") else Response.Write("(Nasdaq: ANLY)") end if %> down $1 9/16 to $16 1/16; Q1 EPS: $0.27 vs. $0.24 last year; Estimate: $0.30
At Home Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ATHM)") else Response.Write("(Nasdaq: ATHM)") end if %> down $2 1/4 to $39 1/4; Q3 EPS: $0.08 loss vs. $0.11 loss last year; Estimate: $0.08 loss
CryoLife Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CRY)") else Response.Write("(NYSE: CRY)") end if %> down $2 1/2 to $12 1/8; Q3 EPS: $0.15 (excluding one-time items) vs. $0.15 last year; Estimate: $0.18
Dover Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DOV)") else Response.Write("(NYSE: DOV)") end if %> down $2 3/8 to $28 5/8; Q3 EPS: $0.42 vs. $0.44 last year; Estimate: $0.46
Kuhlman Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: KUH)") else Response.Write("(NYSE: KUH)") end if %> down $2 5/16 to $23 7/8; Q3 EPS: $0.56 vs. $0.45; Estimate: $0.58
Seagate Technology <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SEG)") else Response.Write("(NYSE: SEG)") end if %> down $3 5/16 to $22 9/16; Q1 EPS: $0.19 (before charges) vs. $0.08 (before charges) last year; Estimate: $0.17
For more earnings announcements, see today's Breakfast With the Fool.
FOOL
ON THE HILL
An Investment Opinion
by
Louis Corrigan
Ziff-Davis Crushed by Debt
Initial public offerings (IPOs) generally underperform the market after the initial six-month honeymoon period is over, and new issues have been slaughtered in the recent market turmoil. Still, newly public companies don't normally have the commanding market presence of a Ziff-Davis <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ZD)") else Response.Write("(NYSE: ZD)") end if %>, the leading publisher of computer magazines, such as the top-ranked PC Magazine, and organizer of the highly successful Comdex computer trade show.
The publisher, which is controlled by Japan's Softbank, which also has major stakes in Yahoo! <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: YHOO)") else Response.Write("(Nasdaq: YHOO)") end if %> and E*Trade <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: EGRP)") else Response.Write("(Nasdaq: EGRP)") end if %>, reported $1.15 billion in 1997 revenues. It has also diversified its holdings of late with ZDNet (www.zdnet.com), the most popular website for technology news, according to recent surveys; the March launch of ZDTV, a 24-hour cable channel; and Yahoo! Internet Life, the nation's fastest-growing technology magazine. If you were looking for a media company well-positioned to benefit from a techno-future, Ziff-Davis would be a leading candidate. So why has the company's stock plunged to around $4 today from the $17 high reached shortly after the company went public in April at $15 1/2?
For starters, business has been not so great. The troubles affecting PC manufacturers and related sectors for most of this year have cut into ad spending. Publishing revenues for the first half of the year dropped 4% to $412 million due to the spin-off of the MacUser and MacWeek magazines into a joint venture. Even adjusting for these shifts, though, publishing revenue grew by just $7 million, or 1.7%. While higher-margin ad revenues at its business publications declined, ad revenues at its consumer publications and at ZDNet increased. In fact, ZDNet second quarter sales jumped 53% to $12.9 million. Still, revenues from its events unit also declined by $4.6 million to $92.9 million due to a drop in exhibition space at the Spring Comdex show, which reflected marketing cost cuts by tech companies.
Even as overall revenues fell by 4.1%, selling, general and administrative expenses rose slightly. Also, the company spent $3.2 million on one-time relocation expenses and reported $4 million in losses related to the launch of new publications. That left Ziff-Davis with an operating loss of $2.6 million for the first six months of 1998 versus an operating profit of $10.5 million for the comparable period of 1997, or a pro forma loss per share of $0.82 versus $0.77. Looking at the EBITDA metric (earnings before interest, taxes, depreciation and amortization) often used to value media companies, we see a decline from $93.8 million last year to just $78.5 million for the first half of 1998.
And the bad news keeps coming. Last Thursday, the company said that third quarter results would be in line with expectations, with revenues coming in at $225 million and EBITDA at $27 million, both up from the third quarter of 1997. However, CFO Tim O'Brien said, "[W]e do not see the previously expected recovery in the fourth quarter." As a result, fourth quarter EBITDA will drop 15% from the year-ago period, due mainly to continued weakness in the publications business. In addition, the company sees the need to tighten its belt and plans to cut 10% of its workforce while discontinuing three publications: Internet Business, Equip, and Windows Pro. The company will take a one-time pre-tax restructuring charge of $50 to $60 million. The moves come on the heels of the firm's reorganization of its international operations, designed to make them more autonomous. In response to the latest news, analysts have slashed their estimates, with some now expecting a loss even for FY99.
Indeed, analysts have even cast doubt on Ziff-Davis's new plan to sell 20% of its ZDNet business to the public. Keith Benjamin, the omnipresent Internet analyst at BancAmerica Robertson Stephens, told the Wall Street Journal that the ZDNet spin-out looked like a sign of "desperation" and that the deal would have worked better a year ago when competitor CNET <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CNWK)") else Response.Write("(Nasdaq: CNWK)") end if %>, operator of the news.com technology news site, went public. However, Ziff-Davis's management thinks ZDNet is being undervalued. CFO O'Brien told Bloomberg that ZDNet alone could be worth $6 to $7 a share.
ZDNet broke even during the second quarter and claims an audience roughly comparable to CNET's. Relevant Knowledge says ZDNet averaged 6.8 million unique visitors during the second quarter, an 8% sequential increase. Average daily page views jumped 89% year-over-year to 5.1 million during the second quarter. Meanwhile Media Metrix ranks ZDNet as the #1 news, information, and entertainment website. For August, it says ZDNet attracted 7.08 million unique visitors compared to 7.015 million for CNET.
The Ziff-Davis stable is full of other thoroughbreds as well. Mediamark Research Inc.'s (MRI) fall study shows that PC Magazine isn't just the top computer publication but the top overall business magazine with a circulation base of 1.175 million and a readership reach of 6 million. Its average issue audience is 22% greater than Business Week's, 52% larger than Forbes', 63% more Fortune's, and 74% higher than the Wall Street Journal's. Moreover, its demographics are first rate. Its average reader is a 39-year-old male with average household income of $75,000. About 82% have attended graduate school and 41% have professional or managerial titles.
The MRI study also shows that Ziff-Davis publishes four of the six leading computer magazines. In addition to PC Magazine, there's PC Computing at #3, Computer Shopper at #4, and the new Yahoo! Internet Life at #6. PC World from International Data Group (IDG) is #2 while CMP Media's <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CMPX)") else Response.Write("(Nasdaq: CMPX)") end if %> Windows Magazine is #6. Looking to the enterprise newsweeklies directed at corporate information technology purchasers, Ziff-Davis's PC Week leads the field for the fourth year in a row, with a 1.14 million audience reach, up 8.8% for the year, according to the IntelliQuest 1998 Computer Industry Media Study. As significant, PC Week and Ziff-Davis's Inter@ctive Week have been gaining influence while IDG's Computerworld and InfoWorld have reportedly been losing audience and CMP's InformationWeek average issue audience increased just 1.2%.
Nonetheless, it's highly misleading for the Wall Street Journal to talk about the "striking" disparity between CNET's market value (currently about $570 million) and Ziff-Davis's (currently about $400 million). What this comparison ignores is Ziff-Davis's substantial $1.5 billion in long-term debt net of cash. Looking at the enterprise value (which includes debt and cash), we see CNET valued at $529 million and Ziff-Davis at $1.9 billion. Indeed, the company's enormous debt burden means that while the stock has dropped 76% from its high, the company's enterprise value has declined by just 40%. This debt is a concern to Standard & Poor's, which placed Ziff-Davis's BB corporate credit and bank loan ratings and B+ subordinated debt rating on Credit Watch, with negative implications, following the publishing firm's downbeat forecast last week.
It remains true, of course, that Ziff-Davis's annual revenues are about 25 times CNET's, although CNET's alliance with NBC could help narrow that gap by driving its Internet growth with the new Snap! portal site. Assuming that ad spending by tech firms picks up down the road and that financial markets solidify enough for ZDNet to go public, Ziff-Davis could prove a bargain. On the other hand, with many international markets dealing with recession and mixed signals on the tech front in the U.S., the company's ad revenues could remain weak for some time. Meanwhile, Ziff-Davis will have to keep making those hefty interest payments, which amounted to about 13% of revenues in the June quarter and probably just slightly less going forward.
Please see the Motley Fool's Conference Calls page for call information and links to synopses.
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