24/7 Wall St.

Sirius/XM Nearing Final Hurdles (SIRI, XMSR)

Sirius Satellite Radio Inc. (NASDAQ: SIRI) and XM Satellite Radio Inc. (NASDAQ: XMSR) are both trading higher pre-market on reports that the last FCC commissioner will back the merger if the companies agree to additional conditions.  FCC Chairman Kevin Martin has already supported the merger despite all of the congressional special interests and the RIAA objections to this competing against terrestrial radio.

Apparently the newest requests are for a 6-year pricing cap and a request for one-quarter of the programming to be made available for minority or public interests.  Interestingly enough, we noted over at VOLUME SPIKE (VSInvestor.com) that there was very unusual options activity around this situation.

After this merger has been in the pending file for 18 months, we'd imagine that both satellite companies will capitulate to these demands even if they sue to break them because of "pricing pressure" in an inflationary environment or over lack of feasibility on the additional programming side.

Sirius shares are up over 3% at $2.17 on over 350,000 shares and XM shares are up almost 5% at $8.85 on 44,000 shares in pre-market trading.

Jon C. Ogg
July 18, 2008

ValueClick: An Omen for Online Ad Spending? (VCLK)

This morning ValueClick (NASDAQ: VCLK) came out and dropped the bomb on forward guidance.  The immediate guidance isn't such a bad issue but the forward guidance is.  It lowered revenue guidance by 2% to $163 to $164 million, but cost cuts helped earnings guidance to $0.17 to $0.18 (up $0.02 on both).

The online ad company cut its 2008 guidance from $730 to $745 million down to $655 to $675 million and cut prior EPS range of $0.81 to $0.83 down to a new lower range of $0.69 to $0.71.

There is a much more important issue than this company itself though, and one which could have ramifications if the company is right.  Tom Vadnais, CEO, said, “Due to increasing macroeconomic uncertainty, we no longer anticipate the seasonal strength in ad spending we typically see in the second half of the year.”  This concern might be analogous to the tail wagging the dog. 

ValueClick is essentially the last man standing on an independent basis in the online ad impression sector.  Its market cap is also only about $1.1 Billion after a drop of 16% to $11.50 this morning (a new 52-week low).  But this may have ramifications elsewhere.  Google (NASDAQ: GOOG) bought DoubleClick. WPP acquired 24/7 Real Media (formerly TFSM).  Microsoft paid a vast sum for aQuantive (formerly AQNT).  And every other major media and content company has been making their online ad spending acquisition plays.

There are two scenarios here and both are as logical as a coin toss.  Either the slowdown in online ad spending is systematic and is going to slow everywhere.  That would be really bad for the giants who spent billions to buy players in this field.  The second possibility is that customers are opting to just bypass ValueClick since they don't necessarily need an independent online ad placement firm.  With the dominance of Google and others, it is possible that online advertisers are just going direct to the top 4 or 5 online destinations directly as they all have their own departments for this.

We are now in the midst of a full fledged earnings season with literally dozens and dozens of companies competing for headline attention.  This is one of those situations that may get overlooked, but it will be critical for all online ad players and online media companies who live on online ad payments.  We'll probably get a better handle on this after the close of today when Google and Microsoft report earnings.

Jon C. Ogg
July 17, 2008

Which Major Media Companies Will Buy The Big Blogs?

24/7 Wall St. recently listed The 25 Most Valuable Blogs. Two have been sold. Ars Technica was acquired by Conde Nast for about what we estimated. The 24/7 price tag was $15 million. Alley Insider reported that that Ars Technica’s price was $15 million to $20 million. PaidContent was sold to the Brit Guardian Group last week. The rumored price was $30 million. 24/7 estimated that the firm was only worth $3.5 million. We are told that a very large portion of the purchase price was contingent on future performance, but our number was probably still way off.

A few days ago, a rumor made the rounds to the effect that AOL was trying to buy TechCrunch for $30 million to $40 million. That price would be right on our estimated value of $30 million. TechCrunch management may want as much as $100 million for the company, which means it won’t be sold.
Based on audience and quality of content, there are about ten to fifteen blogs which will be sold to major media companies over the next year or so. The media conglomerates need them because the blogs have done well in portions of the market where traditional media have not. In a few cases, blogs have content which would be complimentary to the content of a division inside a company like Time Warner, Viacom, or The New York Times.

These blogs are especially attractive economically. Many of the largest blogs employ only a few people. That gives them a financial operating leverage that most traditional media do not have. It is much easier to make money on a big blog than it is to make money on a big magazine or newspaper. That will become a more frequent as traditional media lose more of their ad base

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24/7 Wall St. has reviewed its list of most valuable blogs and added a couple. We have looked at the major media companies that are most likely to buy a particular property. Then, we have added a new element. That is an opinion of which large company needs each blog the most.  Being a willing buyer and being a needy operator is not always the same thing. Ars Technica may have gone the Conde Nast, but the new CNET division of CBS (CBS), which is losing a lot of its audience to blogs, probably needed it more.

The list:

The Huffington Post will probably be bought by The Washington Post Company (WPO), which, oddly enough, is the company which needs Huffington the most. Two years ago, The Post set very high hurdles for the revenue out of its internet business. So far, the results have been extremely disappointing. The portion of its sales coming from online properties is much lower than that of The New York Times Company. Huffington is basically a political blog, although it has added a number of new sections. The Washington Post is the most politics-driven newspaper in the country. Huffington is probably worth $70 million or more. It is the cheap way for the Post to make up for all the ground it has lost online.

 
The Nick Denton Empire, Gawker Media Network, etc. is probably the most valuable blog operation in America, with a sticker in excess of $150 million. It owns Defamer, Jezebel, Gizmodo, Lifehacker, Jalopnik, and Kotaku. The most likely buyer of Gawker is Time Warner. It is a near perfect fit with celebrity-mad People Magazine and flame-throwing gossip website TMZ. The company that may need it the most is Conde Nast, especially if it buys People-clone US Magazine. Conde Nast does not have the huge web audience that AOL has to help Time Warner properties. It needs to significantly expand the online presence it has with websites related to its magazine content. Gawker would get Conde Nast there in just one move.

PopSugar, Sugar Inc. has fifteen sites about shopping, entertainment, and health. The content tends to be aimed at women from their late teens and early forties. 24/7 Wall St. estimated it is worth just over $110 million. It is probably a coin flip over who the most likely buyer would be. On the one hand, the company would be a nearly ideal match with the Conde Nast women’s magazines. On the other, NBC Universal has TV and online properties like Oxygen and iVillage which are a good match. NBCU just put money into women’s blog network BlogHer. The company that needs Sugar the most is Hearst. Hearst online properties have 18 million unique visitors a month. With Hearst’s magazine and newspaper ad revenue under tremendous pressure, it must increase its online opportunities while it still can. Dark horse buyer for Suger: Disney (DIS) for nice match with Hanna Montana.

TechCruch may already be in talks with Time Warner. AOL has a number of tech blogs which are rolled into a network called “Switched”. Many people view TechCruch as the premier blog about the world of online businesses, venture capital, and important tech developments. Time Warner remains the most likely buyer. AOL has been doing some shopping recently and paid a nifty sum for social network Beebo. The company that needs TechCrunch the most is CBS. With its recent purchase of CNET, it bought what many analysts think was a waning asset. The CBS online properties need a very visible presence at the top of their online effort. TechCrunch is as visible as it gets.

Perez Hilton came up on the 24/7 blog value list with a price tag of about $50 million. The easy call here is that this is a match with AOL’s TMZ. That makes Time Warner the most likely buyer. But, Viacom (VIA) needs it much more. The company’s flagging MTV franchise is still trying to be a force online. It has evolved from being a music video “channel” to a programming center for content like “Real World XX”. MTV has also moved heavily into the movie and celebrity scene. Perez Hilton could do a lot to enhance all of that. And, Perez and Sumner Redstone could become best friends

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GigaOm is a pearl of a site about the worlds of technology and online media. From the standpoint of competition, it must run up against TechCrunch and the Dow Jones All Things Digital site. Because Dow Jones is building multiple brands around tech coverage including content from WSJ.com, MarketWatch, and Barron’s,  News Corp might be the most logical buyer. But, The New York Times Company needs it much more. The company’s “Bits” franchise has strong coverage of the worlds of tech and innovation, but it lacks a lot of the “insider” content and scoops that the Om Malik properties have. GigaOm is worth $10 million. NYT ought to snap it up, even at a premium to that.

Drudge Report is a hard property to place. While Drudge is popular, it is still an immensely odd-ball site. The likely buyer of the site is probably the right-of-center Fox News, which itself is a part of the endless list of properties owned by the aged Australian Rupert Murdoch. Drudge and the Fox hosts could spend their days and nights baiting each other. Good theater and a nice way to bring in more visitors. Who needs it most? Gannett. Its online newspaper franchises have a huge audience, but most of the visitors are to the websites of their local newspaper properties. USA Today is Gannett’s only national online standard bearer. Drudge and Gannett would be strange bedfellows, but the country’s largest newspaper chain is bleeding and it needs to push its access to an online news audience as hard as it can

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SeekingAlpha has almost 700,000 unique visitors a month, according to comScore. It may not be as big as The Motley Fool, but it is moving in that direction. 24/7 Wall St. estimates its value at $15 million, but it is the kind of property that could cause a bidding war. It rolls up content from hundreds of financial blogs giving it scores and scores of articles a day. The most logical buyer for the property is Yahoo! (YHOO). SeekingAlpha content already dominates the blog section on all of Yahoo! Finance’s quote pages. But, Yahoo and AOL are already the largest financial sites in the US. Who needs SA? MSN Money does. It lags its two portal peers in online unique visitors and pageviews. It has very modest blog content, particularly compared to AOL, which has a fleet of money blogs. Ballmer & Company can afford it. They want to build their online operations? Here is a chance. Dark horse: McGraw-Hill which needs something in addition to BusinessWeek Online to get big in internet financial content.

Silicon Alley Insider is worth about $6 million according to our work. The most likely buyer is The New York Times Company. Unlike TechCrunch, SAI has a distinctly NY-centric bent to its content. The property would be a good match with both the “Bits” and “DealBook” franchises that NYTimes.com has now. The three content sites would “round out” the Times coverage of the worlds of Wall St., technology, media, and the online universe. Who needs it most? The Financial Times, which has a modest print and online presence in the US and is unlikely to make inroads against WSJ.com and the business and tech sections of NYTimes.com.  FT.com does not have compelling coverage of internet deals, internet companies, technology, and new media.  FT.com is also way too light on content about the money game which has been built up around online business, venture activity, and the giant US tech companies

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Douglas A. McIntyre

3 Value Scenarios for Yahoo!: $17, $22, or $30 (YHOO, GOOG, TWX, MSFT, IACI)

The ongoing Yahoo! Inc. (NASDAQ: YHOO) merger saga with Microsoft (NASDAQ: MSFT) or its potential sidebar deal with Google Inc. (NASDAQ: GOOG) and the fight with Carl Icahn has been covered about every which way that could be imagined.  But what we wanted to look into was how this actually compares to what various valuation scenarios could look like after the company reports earnings and more importantly after its most widely awaited annual meeting in history since the year it came public.

The next best thing to owning a crystal ball that would tell you the future is to run basic analysis on the possible outcomes over the next 20 to 35 days.  We have run various estimate scenarios for Yahoo! stock and come up with three scenarios to determine an implied value upon various outcomes.  Many would argue that intrinsic values are always near the current price of the stock, but we are trying to derive the likely forward valuations based upon the outcomes of the three scenarios. The base scenario is around the current efficient market theory and the other two are the more extreme scenarios.  We admit that there are more than three scenarios, but these are probably the most logical and are in descending order rather than any order as being the most likely.

Scenario 1:  YHOO $30.00
Scenario 1 could come in the form of either of two sub-scenarios, and both could generate up to this $30.00 value.  Sub-Scenario 1 is where Jerry Yang has a great realization and decides to admit the errors of his (and board's) decision to go it alone.  In this scenario he is able to bring Microsoft (NASDAQ: MSFT) back to the table and secure a reduced price of $30.00.  He'd still have future question marks, but he wouldn't go down as the largest wrecker of value.  Sub-Scenario 2 is one where Carl Icahn is able to win all of his efforts, kick out management AND secure a revised deal in some form or fashion with Steve Ballmer as has been telegraphed.  Icahn's board would also have to begin a rapid process of monetizing all of those added properties that Yahoo! has been able to put together itself and might require the favored approach of Icahn in a very leveraged share buyback.  Regardless of which sub-scenario were to occur, this implies that the underlying economy for web properties and for their underlying business partners does not get much worse than today.

Scenario 2:  YHOO $22.00
This second scenario is one where things continue sort of on an as-is basis today and implies something similar to a +/- 15% range above and below that level depending upon the bias of the market.  This also fits into the perfect market or efficient market theory if you are inclined to believe in that notion.  This scenario is one where Jerry Yang and board members win some of their initiatives and lose on some initiatives to Carl Icahn.  It would signal that Yang and friends are forced to capitulate at least some and are forced to make some changes whether they want to or not.  That is also somewhat the current consensus from our discussions with industry people and the traders we have spoken with.  Does that "consensus opinion" mean anything? No, because we are still two weeks or more from even seeing all the preliminary data and likely 3-weeks or 4-weeks away from knowing an outcome and from knowing if either side will accept the voted outcome.  This price range still includes an embedded call option for the possibility of future actions such as deals, takeovers, and/or value enhancements.  This price range also is more indicative of a choppy economy rather than one that is going to get far worse.  At $22.00+, YHOO trades with a current forward multiple of 45.8 based on stock prices of today. We also looked at the AUG-2008 put and and call options with a $2.00 directional bet for either in determining a portion of our +/-15% range on either side.

Scenario 3:  YHOO $17.00
This scenario is an implied value based upon the severe drop in the markets AND is geared around the basis that Jerry Yang and kids win all or most of their initiatives after the board meeting and just stay on their current path alone.  Under this scenario Carl Icahn is not able to get anything done and he has to go away to just eat losses from this entire exercise.  Also Microsoft (NASDAQ: MSFT) would have entered into more than just discussions with another competitor like Time Warner Inc. (NYSE: TWX) via AOL or even doing a deal with Barry Diller and IAC/InterActiveCorp. (NASDAQ: IACI) on a post break-up basis, meaning they did a deal elsewhere and signal absolutely no hope for ANY future Yahoo! tie-up. This also assumes that Panama and other issues continued to lose some ground to Google (NASDAQ: GOOG) and assumes that the remaining search engine competitors and competing web properties maintain their current market share in each field with some competitors making additional inroads on gaining market share at Yahoo!'s expense even if Google's share keeps goes higher.  For a forward valuation and assuming the estimates for 2008 are actually met, then YHOO trades here (at $17.00 hypothetical price) with a forward price/earnings ratio of about 35.  That is still expensive for a lower-growth Internet stock. Google's current forward estimate is 26.5 based upon today's prices and YHOO trades with a current forward multiple of 45 based on $22+ stock prices of today.  This scenario could happen even if the economy stays choppy, but would still imply serious valuation premiums to Google and to the overall market even if Yahoo! meets its estimates.  This scenario also means that Wall Street has taken away any potential deal and the embedded call option premium is taken entirely out of the share price; and it essentially removes extra premiums for other possibilities and implies a multi-year road to recovery led by unresponsive management.

We acknowledge that these are subjective scenarios and also very subjective price values, but they are based on actual data and on assumptions that are in-line with many. There is no crystal ball that can be applied here.  Of all the Wall Street analysts, the average price target is roughly $24.50 to $25.00 for a one-year target as of today.  There are many higher and many lower price targets, but there are very few targets under $17.00 and very few above $30.00.  We also looked at shorter-dated and longer dated call options and put options to try more mathematical calculations for six months out.  Either way, there are many variables that could prove any of these scenarios equally true or false.

Jon C. Ogg
July 16, 2008

Getty Images Goes Bye-Bye (GYI, GOOG, MSFT)

The long-awaited $34.00 cash buyout of Getty Images, Inc. (NYSE: GYI) by Hellman & Friedman looks as though it is coming to an end.  The company has issued a statement that today is the closing date and this is the last day that Getty shares will trade because of going private and being de-listed at the NYSE.

What is interesting is that Hellman & Friedman bought DoubleClick back in 2005 in a deal that was valued around $1.1 Billion, and within three years this was a leading huge Internet acquisition where the firm sold DoubleClick to Google (NASDAQ: GOOG).  The private equity firm sold DoubleClick to Google for around $3.1 Billion.

Getty Images was our top performing Special Situation Newsletter pick where we identified the company's structure in early 2007 as one that would fall victim to the equivalent of an effective industry de-merger.  We saw the issues affecting Getty and taking it far south and the total buyout price was still under our expected price return exit.  That's because the erosion we expected came far faster and even harder than we expected.

Getty Images is roughly worth $2 Billion today.  You could argue that the entire DoubleClick profit is being used to buy Getty.  We think Getty will actually do better as a private company for now and the company has taken many steps (which readers and critics have written about how personally Draconian the measures were) to protect their business interests.  Hellman & Jordan may do the same and it may not. 

We aren't inclined to predict who will own Getty Images after 2010 or 2011, but we are fairly certain that it will look different as an operating company or via who runs it.  Hell, Bill Gates may even want to be a free agent by then and there is another shot for a monopoly or at least a highly dominant market share... and we aren't talking about Microsoft (NASDAQ: MSFT)

Jon C. Ogg
July 2, 2008

Earlybird TMT Analyst Calls (ADBE, AEIS, ASML, CLWR, DT, LRCX, MVL, TI, VRGY, YHOO)

These are the early bird calls we are seeing in telecom, media, and tech:

• Adobe Systems (NASDAQ: ADBE) raised to Overweight from Equal Weight at Morgan Stanley.
• Advanced Energy Industries (NASDAQ: AEIS) raised to Buy from neutral at Goldman Sachs.
• ASML Holding NV (ASML) Raised to Buy from Neutral at Goldman Sachs, but slight lowering of estimates.
• Clearwire (NASDAQ: CLWR) raised to Hold from Sell at at Citigroup.
• Deutsche Telekom (NYSE: DT) raised to Overweight from Equalweight, but target cut to EUR13 from EUR 14.50.
• Lam Research (NASDAQ: LRCX) raised to Goldman Sachs Conviction Buy List from Sell at Goldman Sachs.
• Marvel Enterprises (NYSE: MVL) raised to Outperform at RBC.
• Telecom Italia (NYSE: TI) raised to Outperform at Bernstein.
• Verigy (NASDAQ: VRGY) removed from Goldman Sachs Conviction Buy List on valuation.
• Yahoo! (NASDAQ: YHOO) Downgraded to Underweight from Market Weight at Thomas Weisel.

Jon C. Ogg
June 24, 2008

Google's (GOOG) High Reputation Could Ruin Share Price

Google (GOOG) is now the US company with the highest reputation, at least according to the annual Harris Interactive Reputation Quotient poll. According to Reuters, "Largely for its reputation for treating workers well, Google claimed the No. 1 spot from Microsoft Corp (MSFT), which fell to 10th place."

Other winners in the survey included Intel (INTC), 3M (MMM), and Kraft (KFT).

Being viewed well by the public may be bad for shareholders. Looking good to outsiders and doing well financially are often very different things. At the top of the Fortune "Most Admired Companies List" sit GE (GE) and Starbucks (SBUX). It would be hard to find two companies which have actively done so much to hurt their shareholders. Starbucks failed to monitor its growth and the quality of its service. GE refuses to dump its losing divisions.

Admiration and reputation are a simpleton's way of viewing how corporations are doing. The smart money is looking at earnings.

Douglas A. McIntyre

Record Industry Dying, Digital Thriving: No News Here

PricewaterhouseCoopers released it annual media forecast, and perhaps they should have saved their money. Anyone could have guessed the results.

According to Reuters, the report says "advertising tied to the burgeoning interest in watching videos on the Internet and on devices, such as Apple Inc's iPod, will account for 24 percent of growth in the sector and is projected to grow fastest at a compound annual growth rate of 19.5 percent to 2012."

Global television revenue should be fine.

The music industry is dead.

PwC should stick to the accounting business.

Douglas A. McIntyre

Wal-Mart (WMT) Chases Apple (AAPL) iTunes

Wal-Mart (WMT) seems to have signed an exclusive deal with rock band AC/DC for distribution of its new CD in the stores of the world's largest retailer. Apple (AAPL) won't be selling that album on iTunes.

According to The Wall Street Journal "The AC/DC arrangement aims to replicate a successful strategy recently used by fellow classic-rockers the Eagles and Journey, both of whom in recent months have sold new albums exclusively at Wal-Mart."

The record label companies can't do much to fight Apple. The electronics company controls too much of the digital music world because of its 150 million iPods and its huge iTunes music and video store.

But, Wal-Mart does not have that trouble. It can offer tens of millions of customers of its own and can promote music not only in its stores but at wal-mart.com. According to comScore, Wal-Mart had 22.9 million unique visitors in April compared to 47.8 million for Apple. Some of the Apple visitors probably showed up to buy Macs.

One thing is for certain. Between iTunes and Wal-Mart most of the money coming in for music is not going to the music labels.

Another business, run out of town by Wal-Mart.

Douglas A. McIntyre

Rating The Online Financial Sections At The Top 25 Newspapers

The war for newspapers to stay profitable, and, perhaps long-term, to stay viable has become a race between the fall-off in their print advertising and the increase of their online sales. Based on a look at the numbers from publicly traded companies in the industry, things are going badly. The sole exception may be The New York Times Company, where online revenue is now well over 10% of the total.

One of the critical sections of most online newspaper sites is the financial and business area. Marketers tend to be willing to spend higher rates on business readers because they have money that the readers of the sports sections may not.

24/7 Wall St. looked at the business and finance sections of the online editions of the top 25 newspapers in the US based on their circulation as of March 31, 2007 taken from the Audit Bureau of Circulations.
The sites got ratings of “A” through “F” based on:  1) strength of content, 2) ease of use and navigation, 3) use of new web technology including comments sections, message boards, and multimedia 4) lay-out, and 5) presence of a strong set of current advertisers.

The Wall Street Journal and USA Today were not rated. They are national newspapers. The business content of WSJ.com is well beyond the reach of any other daily. USA Today has a very modest business section based on its desire to keep the news hole of both the paper and the website small. These are two of the 25 on the list.

The list of websites below runs from largest to smallest based on print circulation:

1. The New York Times. It would be hard for any other metropolitan daily to compete with the Times. It has substantially larger editorial resources than any other metropolitan operation. Its most significant drawback is that it runs a reasonable amount of copy which is duplicated elsewhere, particularly by Reuters and The Wall Street Journal. NYT.com makes impressive use of blogs, charting, video, and other interactive features. Perhaps the best content run in the section on a regular basis are the “DealBook” area which covers the financial sector and “Bits” which covers technology.  Ideally, the NYT business section would not have to run such a large amount of copy which overlaps with other sources, but being complete trumps that.  Grade: A

2. Like most of the other online financial editions on this list, the LA Times runs a great deal of copy from sources like Bloomberg and the AP. As might be expected, entertainment and real estate news are overrepresented in the paper, but that is almost certainly in the interests of the readership. Except for the standard buttons for Digg and Facebook after each story, the section does a fairly poor job of engaging readers. The stock and investing tools portion of the site are weak. “The Biz” section on entertainment and “Money & Co.” parts of the site are very good. Grade: B-.

NBC And Time Warner (TWX) Battle For The Weather Channel

Late word is that The Weather Channel will be sold to either GE's (GE) NBCU unit, in partnership with Blackstone (BX), or to Time Warner (TWX).

According to Reuters, "The winning bid is expected to range between $3.5 billion and $4 billion, but closer to $3.5 billion, one source said." Assuming that the number is a reasonable multiple of cash-flow, getting the company would be a brilliant deal.

While a recession may hurt some TV revenue from VOD operations and programming like The Home Shopping Network, the need for weather information should remain constant. The same is true with online operation Weather.com. Ebay (EBAY) and other e-commerce firms may get banged up, but getting forecasts online is part of a great American tradition that predates the web and goes back to the Farmer's Almanac. As a matter of fact, the book is probably still more accurate.

Douglas A. McIntyre

Time Warner’s (TWX) Cable Spin: A Pay-Day For Mr. Bewkes

Time Warner (TWX) plans to spin-off its cable company, Time Warner Cable (TWC), to shareholders. In the process, the parent will get a payment of $9.25 billion as part of a one-time dividend. It will also let most of its debt go to the cable company, improving the balance sheet by a factor which should matter to shareholders.

According to The Wall Street Journal, “Time Warner could use its windfall to cut its debt further, buy back shares or make an investment.”

Leaving aside the big debt which the cable company will have to handle, well over $23 billion, Time Warner will be left with cash and an odd assortment of businesses.

One of the key legs will be the magazine operations, which are not growing due to movement of advertising dollars out of print. The company will have its cable programming businesses like CNN and Turner. They have done well, and there is no reason to believe that the trend will change. The TWX studio operations run in a cycle, depending, at least to some extent on whether the movies produced do well.

AOL will also stay with TWX. It content business is doing well as it gains visitors and page views. Its ad network business, which had the odd name of Platform A, is in trouble now. Integration of several acquisitions has not worked well. If that can be fixed, AOL will have the largest online ad network in the US, something which should have substantial value, and could lift the company to the upper tier of internet advertising sales

What new CEO Jeff Bewkes has not done, at least yet, is make the case about why he is better off without the cable company. To say it has too much debt is to say that shareholders are getting a bad deal by holding it after the spin-off. Keeping cable means keeping cash-flow. TWC mints money.

The first judgment of the spin-off decision will come from the market’s reaction to the announcement. The second judgment may take some time. Having money in the pocket has often been of no benefit to managements of big companies. One visits to the track, they often back the wrong horse.

Douglas A. McIntyre

Social Networks Don't Work For Advertisers: Web 2.0 Is A Bust (GOOG)(TWX)(NWS)

Perhaps someone could have figured this out a year ago, Social networks like MySpace, owned by News Corp (NWS) and Facebook are poor targets for marketers.

No wonder. A social network is a patch work of millions of largely unrelated people posting private and uninteresting things about themselves. Shut-ins who put up their own web presences on the networks are probably the only ones who look at those listings.

Unlike web portals ala AOL, owned by Time Warner (TWX), where content is organized into neat groups, there is no way to find discrete demographic or content sections at social networks. Search advertising, led by Google (GOOG) is even more targeted, matching advertisers with search results.

According to The New York Post "Advertisers in the US will spend $1.4 billion to place ads on social-networking sites this year, down from an earlier estimate of $1.6 billion, eMarketer said." The research firm also revised down its revenue estimates for MySpace and Facebook.

The news is another indication that the largest sites in the Web 2.0 world are a failure. The other huge category in this part of the online industry is video, with YouTube, owned by Google (GOOG) as the leader in visitors. Even management at the search company says it is still working on a way to make money on the website. Given that most of the content is low resolution and posted by amateurs, that is not going to happen.

Web 2.0 is a bust.

Douglas A. McIntyre

IAC/Interactive vs. Liberty: Diller Trumps Malone (IACI, LINTA, LCAPA, LMDIA)

IAC/InteractiveCorp. (NASDAQ: IACI) and Liberty Media Corporation (NASDAQ: LINTA) (NASDAQ: LCAPA) (NASDAQ: LMDIA) have settled their disputes, and it looks like Barry Diller Came out on top of John Malone.

We covered this scenario in our SPECIAL SITUATION newsletter that went out on April 2, 2008 at $21.22; and the intro to subscribers was as follows:

• ....Our current pick is IAC/Interactive (NASDAQ: IACI), and we gave three likely scenarios we believe to occur. Our downside target limits the implied risk to 12% if you hedge your transaction as we would do. The upside would be an implied 33% to more than 50% if the scenarios pan out the way we expect. Barry Diller isn't entirely out of the soup yet and Malone may have some more tricks up his sleeve. After the ruling came out we ran the hard detailed numbers and eyeballed various probabilities for this call....

Liberty has agreed to drop its appeal and will not oppose the proposed single-tier spin-offs of HSN, Interval International, Ticketmaster and Lending Tree.  IAC advanced those filings earlier today by making its initial filings with the SEC.  This is all within our line of expectations and should clear the way to the unlocking of value.

Liberty & IAC also agreed on a number of arrangements regarding the governance of the spun off companies as follows:

• Liberty's right to board representation on each company,
• a standstill agreement that limits Liberty's ability to increase its ownership stakes,
• and to take a variety of other actions with respect to the spun off companies.

You can join our open email distribution list to hear about other break-ups, IPO's, secondary offerings, special financings, mergers, spin-offs, and other special situations.

John Malone may be happy with what he got here and he may not, but as far as we are concerned this looks like a clear win for Barry Diller.  IAC shares closed up 2.7% at $23.00 in normal trading today, and shares are up over 3% at $23.85 in after-hours trading.

Jon C. Ogg
May 12, 2008

Jon Ogg produces the twice-monthly SPECIAL SITUATION INVESTING subscriber newsletter and he can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Is the Viacom Turnaround Afoot? (VIA, CBS)

Viacom Inc. (NYSE: VIA) posted earnings of $0.44 EPS on $3.12 Billion in revenues. First Call consensus estimates were $0.41 EPS and $2.97 Billion on revenues.

This shows that revenues rose 14.7% year over year, and now the company is forecasting a three-year period from 2008 through 2010 where Viacom plans to deliver low double-digit annual growth in diluted earnings per share from continuing operations. This is based on 2007 adjusted diluted EPS of $2.36.

Interestingly enough for 2008, if we take the low-double digit face value and say 11%, we'd get $2.62 EPS and if we take 13% then we get almost $2.67 EPS.  First Call is at $2.66.

If we split the bar there and go for 12% and then plug in the same 12% for 2009, we'd get $2.96.  If we use 13% growth compounded then we get to $3.01 EPS.  First call is at $3.03.

The company has to grow by more than 13%, which is still within the "low double-digit" EPS growth plans.  If tyhe company can achieve that, then Wall Street may be hard pressed not to cheer.  Media is changing big time and the economy is still softening on the surface.

Sumner M. Redstone, Executive Chairman of Viacom, said, "Viacom entered 2008 at an aggressive pace..... We continue to unlock new value.... with our unparalleled entertainment brands. I am more confident than ever that we have the right strategies and the best management to deliver on our commitment to grow shareholder value over time."

Viacom shares closed at $39.92 yesterday and the 52-week trading range is $36.00 to $45.03.

Its ex-property CBS Corp. has recovered almost 10% from the lows of the last 5-days since its earnings came out as well.  CBS closed at $24.05 yesterday, and its 52-week trading range is $20.68 to $35.75.

Maybe Redstone and friends are turning the ship..... assuming they live up to their own internal forecasts.

Jon C. Ogg
May 2, 2008

Shutterfly (SFLY): A Death Rattle From Web 2.0

Shutterfly (SFLY) calls itself an Internet-based social expression and personal publishing service. In reality, it is a simple online photo storage, swapping, and printing service.

No matter what it is, the company is not doing very well. Its shares fell over 17% today after it announced Q1 earnings. The stock fell through its 52-week low and traded down to $12.65. The stock has been as high as $37 during the period.

Shutterfly is not growing like a Web 2.0 company. Revenue rose 29% to $34,3 million. The company forecast Q2 revenue to be up 17% to 27% to a revenue range of $35 to $38 million. In other words, no growth quarter-over-previous-quarter.

Shutterfly also displayed the uncanny ability to lose more money that it did last year. The company's net loss went to $3.6 million from $1.1 million in the quarter a year ago.

A look at the company's P&L shows another source of the trouble. Shutterfly is spending way too much money. Expenses rose from $17 million in Q1 last year to $28.4 million in the last quarter.

If the company is not going to grow very fast, at least it could control expenditures.

Douglas A. McIntyre

TheStreet.com Earnings Miss Estimates (TSCM)

TheStreet.com (NASDAQ: TSCM) has reported earnings this morning.  Jim Cramer's offspring posted a 19% drop in net income to $2.4 million, or $0.07 EPS, but the company posted a 31% increase in revenues to $18.9 million.

First Call had estimates of $0.10 EPS on revenues of $19.95 million.

The initial drop in earnings is so far being tied to the launch of MainStreet.com and other online sites for finance, so it is always possible that the earnings may have some smaller items inside that could be deemed as "extraordinary" expenses.  The revenues were shown as a 18% gain in ads to $6 million, a $2.2 million interactive marketing services revenue from promotions.com (acquired in 2007), a 2% drop in subscription revenues of $8 million, and syndication & licensing rose 290% to $2.7 million (mainly from acquisition of Bankers Financial Products).

As of March 31, 2008, cash, cash equivalents and restricted cash stood at $82.2 million, with essentially no debt.  The company generated cash flow from operations of $4.9 million, and free cash flow totaled $3.5 million.

No trades have been seen pre-market, but shares closed at $9.48 yesterday; its 52-week trading range is $7.46 to $16.74.

Jon C. Ogg
April 29, 2008

Journal Register, Unfit For Listing (JRC)

Journal Register Co. (NYSE: JRC) has been given notice by the NYSE that its shares are slated to get booted off of the prestigious exchange.  The NYSE said in its statement that the company failed the 30-day $1.00 average for 30 consecutive days.  The exchange even cited its "abnormally low price" in the decision.

We have featured this one on numerous occasions via our own "stocks under $10" and the "Old Media / New Media" weekly newsletters as one that was going to buckle under its own weight.   We've even started identifying which newspaper stocks might actually be worth buying at today's prices and those should survive the digital migration.  But just F.Y.I., Journal Register isn't one of them.

Have you ever been on an airplane that lost it's primary hydraulic system with over an hour left in your flight?  It's scary, trust me on that.  The 52-week high is $6.48.  It even used to be $15.00 and even over $20.00.  This looks like a recapitalization is heading the company's way in a hurry after shares closed at $0.265 today.  That will be just as scary as losing the primary hydraulic system.  The company waited far too long to explore its alternatives. We've even speculated last summer about the possibilities that the company would be at risk of servicing its debt.

We recently even noted that this stock could be one of the stocks that go to zero. Journal Register is hanging out with Elvis, Marilyn Monroe, Bogey, and James Dean.  Yep, it's the Boulevard of Broken Dreams.

You can join our open email distribution list to hear about special financings, secondary offerings, IPO's, M&A, and more previews for other special situations in various stages.

There is nothing wrong with being listed on the pink sheets.  Despite the fact that getting information becomes nearly impossible, and despite the issues of no one wanting to own pink sheet stocks, and despite the fact that many institutions are barred from owning pink sheet stocks... yep. Nothing wrong at all.

Jon C. Ogg
April 11, 2008

Jon Ogg produces the Special Situation Investing Newsletter.  He can be reached at jonogg@247wallst.com and he does not own securities in the companies he covers.

Streaming Media Names Industry Hall Of Fame, 24/7 Wall St. Editor Lands A Spot (MSFT)(RNWK)(AKAM)(GE)(CMCSA)

Streaming Media Magazine and Streamingmediia.com have released their list of the twenty-five most important people in in the streaming media industry over the last decade.

“I suppose if you extend the baseball metaphor, these 25 people would really make up the streaming media hall of fame,” said Eric Schumacher-Rasmussen.

According to Streaming Media "We began the selection process by issuing a call for nominations on StreamingMedia.com and to our Streaming Media discussion lists. From a list of more than 75 nominees, we picked the 25 who most clearly fit the bill, either for the technology they’ve created and advanced or the ways in which they’ve implemented solutions as end users."

The list includes Rob Glaser, CEO of Real Networks (RNWK), Stephen Condon, head of marketing at Verisign (VRSN), Michael Gordon, founder of Limelight Networks (LLNW), George Kliavkoff, Chief Digital Officer of GE's (GE) NBC Universal division, Tom Leighton, co-founder of Akamai Technologies (AKAM), Andrew Olson, SVP Comcast (CMCSA) Interactive Media, Ben Waggoner, Silverlight division of Microsoft (MSFT), and Douglas A. McIntyre, Editor of 24/7 Wall St.

Radio One & Ethnic Social Networking Acquisition (ROIAK, ROIA)

After the close this evening, ethnic media player Radio One, Inc. (NASDAQ: ROIAK) (NASDAQ: ROIA) announced it was acquiring a social networking company called Community Connect for around $38 million.  Interestingly enough Radio One has a mere market cap of $143 million.

The good news is that does diversify Radio One away from radio, as the company has been trying to do.  The exact terms were not disclosed.  Back in the day, this would have been a huge gain.  Hopefully Radio One can monetize the social networking theme better than others have. 

Community Connect Inc. is an online community destinations for US ethnic groups with the three largest niche-targeted communities: AsianAvenue.com, BlackPlanet.com and MiGente.com.  This notes that it has some 20 million members.

You can join our open email distribution list to hear about special financings, secondary offerings, IPO's, M&A, and more previews for other special situations in various stages.

Radio One's trading range for the more active ROIAK shares over the last 52-week sis $0.99 to $7.73.  Shares closed at $1.50 today.

Jon C. Ogg
April 10, 2008

Jon Ogg produces the Special Situation Investing Newsletter.  He can be reached at jonogg@247wallst.com and he does not own securities in the companies he covers.

MySpace TV: A Show Without An Audience?

News Corp's (NYSE: NWS) will create a series of TV shows around its MySpace social network website. In a sign that nepotism is not dead, a company owned by News Corp CEO Rupert Murdoch's daughter, Elisabeth, will handle the syndication.

But, having it in the family may be OK, because it is difficult to see how the project will make any money. According to Reuters "The move is a play to make shows such as MySpaceTV's "Quarterlife" or "Roommates" available outside of the United States." The shows were tested in the US and no one watched them.

Media companies will keep trying to move social networking to other platforms and they will keep trying to sell advertising onto the sites. None of it is likely to work. Social networks are among the most personal of internet experiences. People go to these sites to tell something about themselves and interact with friends who have common interests. They are not likely to be looking at advertising in the process and cannot be organized into neat little groups of people who trade stocks or go to baseball games.

There is not such thing as a social network on TV because the screen has no personality of its own.

Douglas A. McIntyre

Journal Register Finally Yells 'Uncle!' (JRC)

Journal Register Company (NYSE: JRC) has finally announced today that it hired Lazard Freres & Co. LLC as its financial advisor to help the company evaluate strategic options.

It noted concern over the state of the economy and the environment for print advertising.  Frankly, this is a boondoggle of epic proportions.  To top it off, last week it was given potential NYSE delisting notice.

The company tries to make at least some shinola out of an the current environment:

• It generated $90.3 million of EBITDA in 2007, above its $38.5 million interest expense; reduced debt by $105 million during 2007; has no scheduled principal payments due until Q2-2009.

We have covered the woes of this company in our "Old Media/New Media" weekly newsletter as one of the in-trouble companies for longer than we care to recall.  The "alternatives" left at this point are few and far between now that management has waited this long to hire an advisor.

Shares are down a massive 64% today at $0.185.  Before today, its 52-week trading range was $0.31 to $6.48.  In 2004, this was a $20.00+ stock.  But since that date, this company has been on a crash course to zero.

Jon C. Ogg
April 7, 2008

Jon Ogg can be reached at jonogg@247wallst.com; he produces the Special Situation Investing Newsletter and he does not own securities in the companies he covers.

24/7 Wall St. Named One Of BusinessWeek's Best Financial Blogs

BusinessWeek published its list of "best financial blogs" today. 24/7 Wall St. was one of the small number of content sites that made the list.

Jon Ogg and Douglas A. McIntyre

24/7 Wall St. Audience Increases 77% In March

According to audience measurement firm Compete, 24/7 Wall St's audience moved up 77% to 150,000 visitors. Over the last year, the websites visitors are up 228%.

We appreciate the support from all of our readers.

Jon Ogg and Douglas A. McIntyre, Editor

Sugar, Inc.: The Twenty-Five Most Valuable Blogs

After 24/7 Wall St. published the Twenty-Five Most Valuable Blogs we decided to look at some niche content sites which compete with blogs and should have similar valuation data.

Sugar, Inc runs seventeen websites. The content at the sites is blog-like but the writing appears more highly controlled and edited than it would be at a blog. The destinations, which include PopSugar, FabSugar, and GeekSugar, are aimed at female teenagers and young women. The company was started by a husband and wife.

Sequoia Capital has put money into the firm. According to The San Francisco Business Times, Sugar bought in $5 million in revenue last year.

According to the company, Sugar's network has 11 million monthly unique visitors and 55 million pageviews. The nature of the advertising would indicate that it gets low CPMs. For our model, we are putting that a $14 per page yield. Monthly revenue is estimated at $770,000., an annual run-rate of $9,240,000.

The company is expensive to run. It has 75 employees. With a full load of benefits, T&E, rent, and communications costs of $110,000 each, the costs for these people is $8,250,000. Accountants, outside consultants, hosting and serving add another $750,000.

The business is growing fast and has a small operating profit.

What is the company worth. Probably a lot to a company like NBC, Conde Nast, or even Hearst.

Could the company go for 12x revenue? Yes. That's $111 million.

Douglas A. McIntyre

Live Nation (LYV) Signs Jay-Z And A Major Headache

Live Nation (LYV) is about to sign over $150 million to rapper and serial business start-up master Jay-Z. For the privilege the NYSE listed company gets a piece of all Jay-Z's business enterprises over the next ten years.

According to The New York Times "the arrangement would position Live Nation to participate in a range of new deals with Jay-Z, one of music’s most entrepreneurial stars, whose past ventures have included the Rocawear clothing line, which he sold last year for $204 million, and the chain of 40/40 nightclubs."

The deal won't work on a number of levels. Jay-Z is almost 40 which is ancient in the rapper world. His most recent albums could not be given away for free. Whether he has more successful business ventures in his pocket is an open question. But, if he is no longer a popular rapper he has lost the coin of the realm which makes new enterprises more easy to open.

Last year Live Nation made only $32 million on $4.2 billion in revenue. The firm has long-term debt of $822 million.

LYV has a Jay-Z-like deal with Madonna. They have locked her up for years. She is also as old has the hills, which probably does not work to her advantage since she is not the Rolling Stones, still touring although most of them a close to 100.

Shares in Live Nation traded at $24 last October. Bad numbers and nut-job deals with major artist types have bought that share price down to under $13.

Jay-Z should be paid in LYV stock. At least then he could lose money, too.

Douglas A. McIntyre

Politico: The Twenty-Five Most Valuable Blogs

After 24/7 Wall St. published the Twenty-Five Most Valuable Blogs we decided to look at some niche content sites which compete with blogs and should have similar valuation data. One of these content sites is Politico.com which vies for readers with Huffington Post and Drudge. We put Huffington's value at $70 million and Drudge at $10 million. Huffington's value was posted at just under 10x revenue and we estimated that the company was slightly profitable.

Compete shows Politico with 1.4 million visitors in February. It is safe to assume that the number should rise though the November election but may fall-off sharply then. Alexa shows a slightly different story. It ranks the site No. 4,053 and shows an audience peak in early February, with some drop-off after that. Quantcast say the site has 1.1 million unique visitors.

Assuming that each visitor represents 2.5 pageviews, Politico would have 3.5 million pageviews a month. Advertising is modest including companies like The New York Times may be sold on a revenue-per-response basis. The site is probably not getting more than a $20 CPM on each page. That would yield an annual revenue run-rate of $840,000 with rapid growth likely over the next six months.

Politico shows about 75 staff members on it masthead. Not all of those people are full-time, but it would not be surprising if half of them got full salaries and benefits. People costs could easily be $2.5 million if the average employee is getting $70,000 including all personnel load. The company clearly has other costs including rent, T&A, communications costs, and website support.

With likely losses, it is hard to give the site a multiple as large as Huffington. At seven times revenue, Politico is worth about $6 million.

Douglas A. McIntyre

   

NYTimes: Huffington Value Compared To 24/7 Wall St. Analysis

In today's New York Times an article on The Huffington Post says that the company is looking for a valuation of $200 million. That would be $53 per unique visitor based on Nielsen figures of 3.7 million for February.

The paper mentions that if the Huffington internal numbers of 14 million unique visitors is used, the valuation per unique visitor is closer to $15.

The $15 seems much more reasonable, but so does using outside figures like those Nielsen supplies. That would give Huffington a value of $56 million. The 24/7 Wall St. valuation for the company is $70 million. The $15 multiple is more more likely, especially since the audience figures for Huffington are likely to fall sharply after the November election.

Douglas A. McIntyre

Barry Diller Gets Wish To Hammer IACI (IACI) Shareholders

Barry Diller and John Malone went after one another in court over whether Diller could get shareholders in IAC/Interactive (IACI) to approve breaking the company into five piece. Each would be traded as a public company. Malone's Liberty Media (LCAPA) said that the voting rights it had given Diller for its shares did not extend to the level which would allow them to be voted for dismantling the company.

The entire matter was pushed into the Delaware courts, and Diller won. According to MarketWatch "Vice Chancellor Stephen Lamb ruled Friday that "Liberty has failed to demonstrate that Diller has breached or threatened to breach any contractual duty he owes to Liberty," according to Lamb's 78-page opinion."

For shareholders, it is a Pyrrhic victory. IACI shares trade near a 52-week low at $20.49. The were above $40 in February of 2007. Revenue growth at the company's big HSN operation has been very modest. Operating income at the unit fell last year. The firm's Lending Tree operation has been badly damaged by the current downturn in housing. IACI's media operations, which include Ask.com, are too small to compete with operations like AOL and MSN.

Diller may have won in court, but it did nothing for his shareholders.

Douglas A. McIntyre

The Twenty-Five Most Valuable Blogs

There is no way to accurately put a value on blogs and blogging companies. All are privately-held and, as is true with many content businesses, the value of the company is based on what a buyer will pay. The figures we have put together look at advertising revenue and income from related businesses like conferences. We have not included blogs affiliated with larger media companies. It is too difficult to break-out what their traffic may be and how their income is divided with the parent. Some blogs are fronts for other businesses like O’Reilly Radar Those have been left out. A lot of big blogs do not make the list because they bring in very little commercial revenue. Treehugger probably falls into that category.

We looked at unique visitor and page view measurement services when possible: Alexa, Compete, and Quantcast. These services are often criticized for estimating website traffic too low. We have tried to take that into account. We also looked at data at blogs which gave their own ad rates and page views.  Our estimated page CPMs are based on quality of ads and number of ads on each page.  We looked at margins based on headcount and our opinion of how may of the people are full-time. Current growth rate based on our measurement sources was also taken into account. A site with traffic doubling year-over-year was give a higher multiple than one with flat traffic. Because not all blogs make money, we looked at multiples of operating income and revenue. These are completely estimates because of the tiny number of blogs which have been sold and lack of information about what the multiples may have been.

Finally, large blogs with big “moats” got higher multiples than smaller ones. Blogs with one founder who contributes a substantial amount of the content got lower multiples than those with several good writers. Blogs which appear to be well-funded or have operated for a long time got better multiples than newer sites or ones where it was not clear that there was a big pool of money behind them.

In short, the task of valuing the largest blogs is impossible. That makes it much more interesting than writing about the P/E at General Electric.

1.The Gawker Properties: $150 million. Gawker, ValleyWag, Gizmodo, Wonkette, and a number of smaller websites. The company claims 30 million monthly unique visitors. According to audience measurement service Quancast, that number is fairly close. Compete shows that traffic to most of the large sites in the group more than doubled from a year ago. If the sites generate one-and a-half page views per unique visitor and the total CPM value of the multiple advertisers on each page is $20, Gawker is an $11 million business which is still growing quickly. The company does not appear to be staff-heavy, so it is imaginable that the margins on the business are 50%.  Would the business be worth 15x revenue or 30x operating profits? Could be.

2.MacRumors: $85 million.Blog knows more about Apple than Apple management does. It ranks No. 2,700 in Alexa. Compete shows 544,000 visitors and moving up quickly. Quantcast puts global unique visitors at 5.3 million. Page views at 33 million, which seems a bit high. Advertising looks high-end and solid, probably at least $30 per page CPM.  Business should do at least $12 million and have a high margin, estimated at 60%. At a 12x multiple.

Data Differentiates Newspaper Vs. Online News Reader Characteristics (SCOR, JRC, MNI, NYT, JRN, GCI)

If you have read any of our commentary or probably most other commentary online, you know that newspapers are not exactly the next growth engine in the economy.  In fact, they are probably losing the same percentage of their client base at the same rate as Southern California loses smokers.  Tonight we saw a report out of comScore (NASDAQ: SCOR) that outlines some of the differences between online news readers and newspaper readers.  You can read that full report from comScore here.

We actually run a newsletter called the "Old Media/New Media Newsletter" here that our own Doug McIntyre produces each week.  We make the case for or against certain media properties such as newspapers, radio, cable, television, and the internet.  Believe it or not, we actually just covered some newspapers that we identified as survivors.  Sure some we covered as likely funeral candidates as well.  This went out Sunday night to our readers and we've just taken it off embargo if you would like to read a copy. 

Companies mentioned in the report are Journal Register (NYSE: JRC), McClatchy (NYSE: MNI), Journal News (NYSE: JRN), Gannett (NYSE: GCI), The Washington Post (NYSE: WPO), and the New York Times (NYSE: NYT).  Not all of those are buys, but some will actually survive the secular trend working against the sector.  Take a Test ride.

Jon C. Ogg
March 13, 2008

Goldman Sachs Turning Off Satellite Radio (XMSR, SIRI)

Goldman Sachs has panned satellite radio stocks and maintained a cautious "Sell" on XM Satellite Radio (XMSR).  What is interesting is that Goldman Sachs has also noted that its channel checks have indicated that it now appears "less likely that the DOJ will block the merger" with Sirius Satellite Radio (NASDAQ: SIRI).  But it also believes that deal or no deal, XM/Sirius shares would run up and mark near-term highs just like last year when the merger was announced.

This note even says that merged or un-merged, Goldman Sachs outlook for cautious based on unrealistic cash flow expectations.

Earlier this week we also saw Stanford indicate how it believes a merger approval from the DOJ is likely imminent.

Jon C. Ogg
February 15, 2008

Nielsen Branding Shows Why Microsoft Wants Yahoo! in Google Fight (MSFT, YHOO, GOOG)

Nielsen has released its top aggregate sites by parent company for January 2008, and it starts getting even more clear why this super-merger on the web is being pursued.  Below is the TOP 10 broken down by the related "parent companies", and this combines "work and home" inside the U.S.:
                                Unique    Time Per
                              Audience      Person
Parent                       (000)  (hh:mm:ss)
1.  Google                 124,279     1:37:35
2.  Microsoft              121,920     2:22:33
3.  Yahoo!                 113,874     3:19:43
4.  Time Warner       104,837     3:57:38
5.  News Corp.         75,831     2:02:49
6.  eBay                      65,758     2:04:37
7.  InterActiveCorp    65,691     0:24:37
8.  Amazon                 59,833     0:27:47
9.  Wikimedia             56,049     0:18:32
10. New York Times  51,624     0:20:26

Boutique Calling For Sirius-XM Approval (SIRI, XMSR)

There is an interesting note out of Stanford Group Company's Paul Gallant calling for the likely approval of the merger between Sirius Satellite Radio (NASDAQ: SIRI) and XM Satellite Radio (NASDAQ: XMSR).  The research note states specifically "We believe the Department of Justice (DOJ) is near a ruling on the XM-Sirius merger, and we reiterate our belief that it is likely to win regulatory approval. "

It also noted a last ditch effort of an opposition group meeting with the DOJ and notes this is usually parties who are likely to lose the battle.  "As for timing, DOJ’s ruling could come any day now. Shortly after DOJ rules, we expect FCC Chairman Martin to recommend to his fellow commissioners the same outcome reached by DOJ. "

While this is a belief in support of the merger, Stanford does not conditions will still likely exist:

• requiring Sirius/XM to include HD tuners in each unit sold;
• restricting local advertising or local content;
• imposing terms for various pricing/a la carte commitments.

This merger has persisted almost exactly a year and has been one of the more fought over mergers from alleged consumer groups, although the defiant RIAA is opposing this more from a self interest than from a consumer protectionist group.  As always, follow the money and you don't ever have to go too far.

Sirius shares are up 1.1% at $3.175, although shares were up as high as $3.25 today.  XM shares are up roughly 2.2% to $13.00, although it has traded as high as $13.35 today.

Please keep in mind that speculation on this has gone on and on: 

• In October CNBC ran something about a "bias toward approval" being the case.
• Barron's sent shares lower in December on concerns it might not work out.
• Both proxy firms Glass, Lewis, & Co. and ISS have recommended for shareholders to approve the deal.
• We've even noted ourselves how XM looks like it was trying to make survival plans.

Both stocks were higher earlier in the day.  It is the belief of 247WallSt.com that no such concerns over competition are merited.  We also believe that this merger must go through for at least one of these satellite radio providers to survive