Archive for the ‘Technology Stocks’ Category

Netflix To Expand Into Latin America

Tuesday, July 5th, 2011

Netflix (Nasadaq:NFLX) will continue to conquer the Americas: the online video rental service announced this morning that it will be expanding to 43 countries in Latin America and the Caribbean later this year. The news comes after endless hinting earlier this year from Netflix about its future expansion plans. Some had expected Netflix to enter the European market, but there it would have had to compete with the entrenched video service LoveFilm (which was acquired by Amazon earlier this year).

Netflix said that its streaming video service would be headed to Mexico, Central America, South America and Caribbean countries, but it didn’t specify which countries in the latter regions. The company will offer English, Spanish and Portuguese language options in the regions (which is a big hint that it will be heading to Brazil as well). Just like with Netflix’s Canadian launch last year, the company will only offer streaming video in the new markets (I can’t imagine how Netflix would deal with physical discs in international markets). The announcement is yet another indicator that Netflix’s real future is in streaming video, although that has been clear even in the US for some time.

I think that there is a lot of room for growth in these markets. The Latin American market has an estimated 215 million user base, compared to the U.S. with about 245 million. In a letter to investors in April, Netflix said it expected to have $50 million to $70 million in operating losses during the second half of the year due to its second international expansion.

Once considered a friend to TV and movie studios, media conglomerates have fretted over the service’s popularity because it threatens traditional cable and satellite providers. The fear is that consumers will drop pricey cable packages — known as cord cutting — in favor of cheaper services offered by companies such as Netflix. Netflix has more than 23 million subscribers. By contrast, Comcast (CMCSA.O), the No. 1 U.S. cable operator, has 22.8 million subscribers as of March 31. Netflix shares were up 6.3 percent at $284.92 in late morning Nasdaq trading.

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Morning Markets Fall After Wednesday’s US Data

Wednesday, June 15th, 2011

U.S. stock markets fell harder Wednesday after economic reports had a regional manufacturing index declining sharply in June and consumer prices gaining 0.2% in May. The Dow Jones Industrial Average fell 105 points to 11,913. Standard & Poor’s 500 were down 11.7 points to 1,272.8.

On the economic front, the consumer price index rose 0.2 percent in May, down from April’s 0.4 recent increase, according to the Labor Department. Food costs rose 0.4 percent, while energy costs fell 1 percent, the first drop in almost a year.

Meanwhile, a gauge of manufacturing in New York State showed the sector unexpectedly contracted in June, falling to minus 7.79 for the first time since November 2010 from positive 11.88 in the month before, in another sign the economic slowdown could become more protracted, according to the New York Federal Reserve. Economists polled by Reuters had expected a gain to 12.50.

In other economic news, the Mortgage Bankers Association said refinancing requests pushed home loan applications to their highest level in three months. The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinancing and home purchase demand, surged 13 percent in the week ended June 10, the biggest percent gain since March. The MBA’s seasonally adjusted index of refinancing applications jumped 16.5 percent, while the gauge of loan requests for home purchases climbed 4.5 percent. Mortgage rates have declined for eight of the past nine weeks. Coming off of the Memorial Day holiday, refinance application volume increased significantly, as borrowers jumped to lock in the lowest mortgage rates since last November.

Pandora (NYSE:P) opened this morning at $20.50 up 28.13% from $16 and still rising.

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Pandora IPO Prices At $16 Set For 6-15-11

Tuesday, June 14th, 2011

In a HOTT internet 2.0 IPO markets, Pandora (NYSE:P) for the third time increases it’s final IPO price set at $16.00 with a valuation $2.56 Billion. The company sold 14.7 million initial public offering shares at a level that topped a boosted price range of $10 to $12. The company last week increased the number of shares sold by one million and the price range by $3 in the face of strong investor demand. At $16 a share, the offering ended up raising $235 million, almost double the amount originally aimed for earlier this month. Pandora sold $96 million of stock, while shareholders, namely Hearst Corp., sold the rest. Pandora commands a market capitalization of $2.56 billion for a business that hasn’t made money and has no prospects of earnings at least through January. Pandora’s revenue has grown fast, but the company isn’t profitable on a net or operating basis. So far, the company hasn’t been able to generate enough revenue from advertising to offset its royalty expenses, and it warns that it expects to continue generating operating losses at least through fiscal 2012, which ends in January.

Among Pandora’s venture capital shareholders, Crosslink Capital will own 21.9% after the offering, currently worth $560 million; Walden Venture Capital, 17.8% worth $455 million; Greylock Partners, 13.4% worth $343 million; Labrador Ventures, 8.1% worth $206 million; and GGV Capital, 4.9% worth $126 million. Other investors have included DBL Investors, Elevation Partners, King Street Capital and Selby Ventures, according to VentureWire records. The company has raised more than $50 million in venture capital. The stock is scheduled to begin trading Wednesday under the symbol P on the New York Stock Exchange.

If prior internet stocks shows any signs of previous success such as last month’s, Russian search engine Yandex N.V. (NASDAQ:YNDX) priced above range and rose 55% on its first day of trading, while online professional networking site LinkedIn Corp. (NYSE:LNKD) doubled on its debut, we’re set another successful ride. At the open trade between 9:30-11:30 AM EST. I anticipate this stock to open at $25 to retail investors and hit $35-$45 range, resulting a 56% gain (from$16-Initial investors i.e. big money & funds), 40-60% gain scalp for retail investors.

See details and analysis of Pandora here

Disclaimer: I currently do not own this stock, but intend to trade it throughout the day

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Pandora (NYSE:P) Debuts June 15th

Monday, June 13th, 2011

Pandora Media Inc. increased the size and price range of its proposed initial public offering on Friday, upping the total potential take of the deal by 43% ahead of the streaming media company’s public debut, which is expected to take place June 15th. Pandora said it now plans to sell about 14.68 million shares at a proposed price range of $10-$12 per share. The company had previously offered to sell 13.68 million shares at a price range of $7-$9 per share. The total value of the deal could reach about $176 million at the high end of its price range. The pricing of the stock puts Pandora’s valuation suggesting a total value of $1.94 billion at high end. The company, which has yet to turn a profit, first filed to go public in February. At the time, Pandora expected to raise $100 million. The steady increases are a sign that the IPO’s underwriters — Citigroup, Morgan Stanley, and JP Morgan Chase are the leaders, anticipate heavy demand for the company’s shares. The company expects to trade under the ticker symbol “P” on the New York Stock Exchange.

About Pandora

Pandora Radio is an internet radio service, recommendation service, and the custodian of the Music Genome Project. Users enter a song or artist that they enjoy, and the service responds by playing selections that are musically similar. Users provide feedback on approval or disapproval of individual songs, which Pandora takes into account for future selections. While listening, users are offered the ability to buy the songs or albums at various online retailers. As part of the Music Genome Project, over 400 different musical attributes are considered when selecting the next song. These 400 attributes are combined into larger groups called focus traits. There are 2,000 focus traits. Examples of these are rhythm syncopation, key tonality, vocal harmonies, and displayed instrumental proficiency.

The Music Genome Project is what powers Pandora’s personalization, as it is a detailed, hand-built musical taxonomy. Using this musicological “DNA” and constant listener feedback Pandora crafts personalized stations from the more than 800,000 songs that have been analyzed since the project began in January 2000. More than 75 million people throughout the United States listen to personalized radio stations for free on Pandora through their PCs, mobile phones and devices such as the iPad, and connected in-house devices ranging from TVs to set-top boxes to Blu-Ray players. Mobile technology has been a significant factor in the growth and popularity of Pandora, starting with the introduction of the Apple app store for the iPhone in the Summer of 2008. Pandora instantly became one of the most top downloaded apps and today, according to Nielsen, is one of the top five most popular apps across all smart-phone platforms. Pandora is mostly free and, thanks to connectivity, available everywhere consumers are – at the office, at home, in the car and all points in between.

In 2009 the Company announced that Pandora would be incorporated into the dashboard in Ford cars via SYNC technology; GM has already followed in announcing plans to integrate Pandora into its vehicles’ OnStar system. Since more than 50% of radio listening happens in the car, this was a crucial arena for Pandora.

The Oakland, Calif., company’s business is growing fast, averaging a new user every second. As of last April, Pandora had 90 million registered members, up from 80 million in February. Those members racked up 3.8 billion hours of listening to Pandora’s song stream last year. Founded in 2000 as the Music Genome Project, Pandora uses algorithms and user feedback to generate music recommendations for its listeners. The company claims a 50% share of all Internet radio listening time among the top 20 stations and networks in the United States, according to a November 2010 report by audience measurement firm Ando Media. Pandora offers listeners two options: A free, advertising-supported stream or a “premium” plan priced at $36 per year, which offers higher audio quality and no ads. Most of its revenue base comes from advertising. Revenue surged 150% to reach $137.7 million in the fiscal year ended Jan. 31, 2011. Net losses fell to $1.76 million from $16.7 million the previous year. Due to copyright and licensing rulings, Pandora is only available in the United States, but Pandora has said that it has plans to extend its service to a global market.

Financials

Revenue for the 9 months ended October 31, 2010 was $90.12 million. That’s an increase over 30.1 million over the same months in 2009. Net income in the first 9 months of 2010 was…a loss of $328,000. Pandora lost $18 million during the same months in 2009. During the first nine months of 2010, Pandora ad revenue reached $78 million. That’s up from $29 million during the same period in 2009. That’s huge growth. Subscription revenue was $12.3 million during the first 9 months of 2010. It was $4 million during the first 9 months of 2009. That’s huge growth.

Increasing Expense & Risk – “Royalties”

Pandora paid out 49% of its revenue to license the music it sends to listeners via its customized, online radio channels. Even more important, the key royalty rates that the still-unprofitable company pays to artists and music publishers are set to rise significantly during the next four years. Pandora agreed to give up the greater of 25% percent of its annual revenue, or another aggregate amount based on a royalty rate charged each time Pandora plays a copyrighted song. Pandora is consistently paying about half its revenue in license fees, or nearly double the 25% figure that was part of the agreement, provides a pretty clear indication of which party got a better deal. What’s worse for Pandora (and, soon, for its public shareholders) is that the rate for its license, known as a “pure-play license,” is calculated based on a sliding scale that jumps substantially over time.

For 2011, Pandora pays a per-performance rate of $0.00102 for songs played on its non-subscription service. That service, by the way, generated 86% of the company’s revenue for the nine months ended Oct. 31, 2010, according the company’s initial S-1 regulatory filing. By 2015, the rate goes up by more than a third, or 37%, to $0.00140 per performance. For music played on Pandora’s subscription service, which generated the other 14% of revenue during those same nine months, the company is paying a per-performance rate of $0.0017 in 2011. By 2015, that rate jumps a whopping 47%, to $0.0025. And, as Pandora itself says in its S-1 document, the company gets no volume discount on royalty fees. In other words, the more it plays, the more it pays. And those are not all the royalty fees that Pandora has to pay. It also has an agreement with the music publishing organization BMI that causes it to fork over another 1.75% of its “gross revenue,” and another with a similar group, known as SESAC, that pays out 0.38% of gross revenue.

Pandora detailed in its S-1, the company paid 48% of its revenue to acquire content. It clearly states that the company is at a disadvantage to its non-Internet rivals because “unlike traditional radio broadcasters, they must pay performance rights royalties for the digital audio transmission of sound recordings …”  The company’s S-1 filing also says this: “As a result of these (several) factors, we expect to continue to incur operating losses on an annual basis through at least the end of fiscal 2012.” When the company expects to be profitable, the prospectus doesn’t say. How it will pull that off while its biggest expense is rising by at least a third during the next four years is also a mystery. They will need the extra cash to continue the huge run-up in top line revenue growth that they are getting basically from advertising revenue.

Competition

Pandora’s increased IPO price also comes as competition is growing for how people listen to music. Earlier this week, Apple unveiled a digital-music service that will allow users to remotely access their songs. Meanwhile, Amazon.com Inc. (AMZN) and Google Inc. (GOOG) also offer similar products. Pandora admits in its filing that the three companies and Facebook pose a significant threat if they were to develop a competing Internet radio platform, because they likely would have advantages in resources, technology and services. For now, though, Pandora has a strong head start. According to a September 2010 report by Nielsen, a media measurement firm, the Pandora app is a top-five-most-used app across all four major smartphone platforms in the U.S.; in January, the Pandora app was the No. 2 all-time downloaded free iPhone app and the No. 1 all-time downloaded free iPad app, according to Apple.

Beneficiaries

Employees and investors who stuck with Pandora will be the biggest beneficiaries of the IPO. That’s because 8.68 million of the 14.68 million shares that Pandora now expects to sell in its offering are being sold by existing shareholders, which means most of the money raised in the offering will go into private hands, rather than onto the company’s balance sheet.

Here’s the full ownership table:

Pandora Shareholders

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GroupOn Files For IPO (GRPN)

Friday, June 3rd, 2011

After months of speculation, U.S. online group discount retailer GroupOn finally took the plunge and filed for an initial public offering (IPO) to raise about $750 million. Rumors have it Groupon could seek to raise as much as close to $1 billion at a valuation of about $20 billion. The highly anticipated filing offers the first public look at the finances of one of the tech scene’s hottest startups. In April 2010, the company was valued at $1.35 billion. Based on Groupon’s filing, the company could be valued as much as $20 billion. GroupOn plans to trade under the ticker symbol “GRPN,” though it did not reveal which exchange will list its shares. The lead underwriters are Morgan Stanley, Goldman Sachs and Credit Suisse. Earlier this year LinkedIn (LNKD) saw its shares soar in their first day of trading. Yandex (YNDX), a Russian search engine, also saw big gains when it came public. The increase in public offerings of Internet companies associated with the social networking boom has increased buzz over a potential IPO by Facebook. Anticipated price to retailers is $100-$140 range. No indication on about how soon the pricing will come.

GroupOn’s SEC Filing here.

GroupOn’s Website

About GroupOn

Groupon (a portmanteau derived from “group coupon”) is a deal-of-the-day website that features discounted gift certificates usable at local or national companies. GroupOn was launched on November 2008, the first market for Groupon was Chicago, followed soon thereafter byBoston, New York City, and Toronto. As of October 2010, GroupOn serves more than 150 markets in North America and 100 markets in Europe, Asia and South America and has amassed 35 million registered users.

GroupOn serves many major geographic markets internationally including cites in the United States, Canada, Taiwan, Brazil, Germany, Greece, France, the Netherlands, Belgium, theUnited Kingdom, India, Israel, Italy, Portugal, Spain, Puerto Rico, Japan, Poland, Turkey, Mexico, Peru, Chile, Colombia, South Korea, Sweden, Argentina, the United Arab Emirates,Norway, Romania, Singapore, Malaysia, Hong Kong, Mainland China, and Russia. In Australia, development of GroupOn has been slow owing to legal disputes between Groupon and an Australian company, Scoopon. GroupOn now operates in Australia as “Stardeals” while the legal problems are worked out. On February 19, 2011 The Wall Street Journal reported that GroupOn was preparing to launch in China. GroupOn is also expanding into the MENA region with its launch of Groupon UAE on March 1, 2011. GroupOn New Zealand launched on 10th May 2011 in conjunction with local Facebook tourism hub Gotta Love NZ. The New Zealand market is already crowded with over 50 deal sites active.

The idea for GroupOn was created by now-CEO and Pittsburgh native Andrew Mason. The idea subsequently gained the attention of his former employer, Eric Lefkofsky, who provided $1 million in “seed money” to develop the idea. In April 2010, the company was valued at $1.35 billion. According to a report conducted by GroupOn’s marketing association and reported in Forbes Magazine, which was reported by the Wall Street Journal, Groupon is “projecting that the company is on pace to make $1 billion in sales faster than any other business, ever”.

GroupOn also owns several international operations, all of which were originally deal-of-the-day services similar to it, but then re-branded under the Groupon name after acquisition; these have included the European-based MyCityDeal (17 May 2010), the South American ClanDescuento (22 June 2010), the Singaporean Beeconomic.com, the Japanese service Qpod.jp, Russian Darberry.ru (both on 17 August 2010). Groupon has recently bought the Indian deal-of-the-day website SoSasta.com and will be re-branding it soon as well. The Groupon acquisitions of uBuyiBuy launched services under the Groupon name in Hong Kong, Singapore, the Philippines and Taiwan. GroupOn also acquired GroupsMore.com in Malaysia to expand its business there. Prior to these acquisitions, Groupon had bought out the mobile technology company Mob.ly. The Point, Inc., the predecessor to Groupon,bought the trademark “GROUP-ONS” from its originator in February 2009 under terms which allows the originator and first registrantof the trademark to continue the use of this trademark.

GroupOn has made 13 acquisitions in the past year. GroupOn has paid $34.8 million for its acquisitions, not including CityDeal and QPod.

The company now has more than 8,000 employees worldwide, up from 37 employees two years ago. It also has 83 million subscribers, who purchased 28 million deals from the company last quarter.

Financials

Founded in 2008, the Chicago company had revenue of $713 million in 2010, up from $30 million in 2009. That number reflects the face value of the coupons sold, a portion of which gets passed on to the merchants. Groupon’s “gross profit” is the amount of revenue it keeps after making those payouts. In 2010, GroupOn’s gross profile was $280 million. This year’s sales are on track to be even stronger: GroupOn revealed in its filing to the SEC that it netted $645 million in sales in the first quarter of 2011 alone, and a gross profit of $270 million.

But GroupOn is not yet actually earning money. It lost $413 million in 2010 and lost almost $114 million in the first quarter of 2011. GroupOn’s 2011 estimated revenues are in the $3 billion to $4 billion range.

By wooing subscribers is pricey: GroupOn spent almost $180 million in the first quarter on online marketing to attract new subscribers.

Existing companies with a similar business models such as Travelzoo (TZOO) 70.39 and Open Table (OPEN) 85.66, which already have a proven track record of making money, are valued only at $1-$2 billion.

Don’t expect profits anytime soon: Groupon hasn’t turned a net profit in any of its first three years of operations, including a net loss of $389.6 million in 2010. The company said it expects its “operating expenses will increase substantially in the foreseeable future as they continue to invest to increase subscriber base, increase the number and variety of deals offered each day, expand marketing channels, operations, hire additional employees and develop technology platform.

Groupon had $208.7 million in cash and cash equivalents on March 31, 2011.

Buyout Offers

In October 2010, Yahoo! was rumored to have offered over $3 billion to acquire Groupon. On November 30, 2010, it was reported that Google offered $5.3 billion with a $700 million earnout to acquire Groupon and was rejected on December 3, 2010.

Funders

New Enterprise Associates. Eric Lefkofsky and Brad Keywell are investors in Groupon. In April 2010, GroupOn raised $135 million from Digital Sky Technologies, a Russian investment firm. On December 29, 2010, GroupOn’s executive board approved a change to GroupOn’s certificate of incorporation that would permit the company to raise $950 million in venture capital funding, based on a valuation of $6.4 billion.

Several rounds of venture-capital financing including a recent one for $1 billion have reduced the GroupOn founders’ stake in their business. Mason still owns around 8% of the company, while co-founder and board chairman Eric Lefkofsky is the main shareholder with almost 22%. Mason owns 22,967,252 Class A shares (7.7% of the total) and owns the same amount of Class B shares as Lefkofsky: 499,992 (41.7% of the total). The company’s largest shareholder isn’t CEO and founder Andrew Mason, but investor and co-founder Eric P. Lefkofsky. He owns 64,113,046 Class A shares (21.6% of the total) and 499,992 Class B shares (41.7% of the total). Other significant stakeholders include venture capital firms New Enterprise Associates and Accel Partners. CityDeal, a European daily-deals rival GroupOn acquired last year, owns around 10% of the company. However, like many tech companies, GroupOn has a dual-stock structure that lets the company’s insiders retain significant control over shareholder decisions even after others become stockholders. Co-founders Mason, Lefkosky and Bradley Keywell own all of the company’s “class b” shares, giving them a majority vote on matters put before shareholders.

Competitors

Worldwide, there are over 500 similar sites including over 100 in US. However, by December 2010, only one competitor, named LivingSocial, has been described as a serious competitor; according to one estimate, it received an investment from Amazon of $175 million. Other notable firms operating in the market include Xferral, BuyWithMe, Plum district, Jasmere.com, Groop Swoop, TownHog, and eWinWin.

In January 2011, reports surfaced that Google was planning to launch a competing product, called Google Offers, following its failure to purchase Groupon for $6 billion.

In April 2011, Facebook begins testing social-buying program. This move by Facebook was considered a major blow to Groupon.

There are also some similar websites which targets on specific markets, such as Campus Dibs and Unibuyhk.

Risks

The two-and-a-half year old company has been trying to expand rapidly, signing up deals with nearly 57,000 merchants in over 40 countries. But that has proved costly as the company wound up in the red, posting a $413.4 million loss last year and a further $113.9 million in the first quarter this year. The sky-high valuations of these new social media companies suggest there is still a risk-on type mentality for most investors. Exuberance will persist until FaceBook becomes public!

There are plenty of questions about Groupon’s business, and whether it can last. Some local business owners have complained that Groupon doesn’t work, or takes too big of a slice of every daily offer (generally about half). There are a slew of Groupon imitators, and everyone from Facebook to local newspapers is plunging into the market.

In its IPO filing, Groupon says it expects to “increasingly compete against other large internet and technology-based businesses, such as Facebook, Google and Microsoft, each of which has launched initiatives which are directly competitive to our business.”

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Yandex To Debut This Morning

Tuesday, May 24th, 2011

Russia’s Google Yandex (NASDAQ:YNDK) set to trade for the first time within minutes!!! According to a report released by WalStreet Journal

Shares of Russian search engine Yandex NV will begin trading Tuesday after its initial public offering was priced Monday night at $25 a share, above its expected range. The company sold 52.2 million Class A shares, raising a total of $1.3 billion. Yandex had originally set its expected price range at $20 to $22. The stock will trade on the Nasdaq under the symbol YNDX

Yandex, the largest Russian Internet company by revenue, is also its most popular search engine, generating 65% of all search traffic in a country that isn’t dominated by Google Inc. he company also operates in Ukraine, Kazakhstan and Belarus.

Consumer Internet companies both public and private have been drawing buzz in the U.S., especially in the wake of LinkedIn Inc.’s initial public offering last week, during which its shares doubled on the first day, the second-highest IPO performance of the year. That stock closed down 5% for the day Monday

Though Yandex isn’t in the same social media sector as LinkedIn, its dominance in a high-growth region for Internet users is attractive to investors.

I anticipate the exuberance to carry over into Yandex.

A little research on Yandek here

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Russia’s Google Yandek (NASDAQ:YNDK) To IPO May 24th

Friday, May 20th, 2011

After LinkedIn’s euphoric IPO, lets move onto the next big Internet IPO scheduled for next week. Russia’s Yandex is set to complete the biggest internet IPO since Google, as investors wary of much-hyped social networks look instead for exposure to the fast-growing online advertising market. Russian search giant Yandex N.V. (NASDAQ:YNDX) is scheduled to price Monday, May 24th. The company plans to list on the NASDAQ. The offering has been said to be oversubscribed since day one of the company roadshow, and books are now rumored to be closing today (May 20). Yandex is offering 52.2 million shares at $20.00 to $22.00. Of the shares offered, 15.4 million are primary shares offered by the company, and 36.8 million or about 70 percent are secondary shares offered by selling shareholders, including Tiger Global Holding, Baring Vostok Private Equity funds, Roth Advisors, International Finance Corp., and current directors and members of management. Yandex’s offering, which seeks to raise as much as $1.15 billion, follows an initial offer by Chinese social-networking website Renren Inc. earlier this month. Net proceeds to the company of approximately $305 million are expected to be used for general corporate purposes, including investments in technology infrastructure. The lead underwriters on the offering are Morgan Stanley, Deutsche Bank, and Goldman Sachs. The $21 midpoint of the offering range would value Yandex at $6.75 billion. A Russian comparable is Mail.ru, which went public in November, raising $912 million. That would make it the biggest IPO by an internet firm since Google raised $1.67 billion in 2004.

About Yandex

Yandex plans to use IPO proceeds to invest in technology infrastructure, especially new servers and data centers, and for possible acquisitions of or investments in technologies, teams and businesses.

HISTORY/OWNERSHIP/BUSINESS

Yandex was founded by Arkady Volozh and Ilya Segalovich in 1997 as search engine www.yandex.ru for the Russian Internet users. It has since established businesses in Ukraine (yandex.ua), Kazakhstan (yandex.kz) and Belarus (yandex.by). Launched worldwide search at www.yandex.com in May 2010.

Main shareholders prior to the IPO: Baring Vostok Private Equity Funds with a 24.49 percent stake, Arkady Volozh (20.27 percent), Roth Advisors (6.58 percent), International Finance Corporation (6.27 percent), Ilya Segalovich (4.24 percent).

Main shareholders’ stakes after the IPO: Baring Vostok Private Equity Funds with 25.97 percent, Arkady Volozh (19.77 percent), Roth Advisors (5.95 percent), International Finance Corporation (5.51 percent), Ilya Segalovich (4.15 percent).

In autumn 2009 Yandex handed over a ‘golden share’ in its Netherlands-registered parent company Yandex N.V. to Russian state bank Sberbank, giving it a right to veto any future deal that would see a single shareholder acquire a stake of more than 25 percent.

Full-year 2010 revenue rose 43.2 percent to 12.5 billion roubles ($445.2 million) to U.S. Generally Accepted Accounting Principles (GAAP). First-quarter 2011 revenues stood at $137 million.

Net profit rose to 3.8 billion roubles ($135.3 million) in 2010 from 2 billion roubles in 2009. First-quarter 2011 net profit amounted to $28.8 million.

The number of advertisers rose by more than 40 percent in 2010 to 180,000.

Yandex owns 65% market share (a/o March 2011) of all search traffic in Russia, well ahead of number two Google with 22% share. Their share of search traffic has grown from 58% in March 2009. The yandex.ru website is also the most popular online destination in Russia with 38.3 million monthly unique visitors, ahead of Mail.ru (35.7M), Vkontakte (31.6M) and Google (28.4M). Aside from being the leader in search, the company also claims to be number one in news, mobile applications, online advertising platform, maps, and market comparison shopping. It is number 2 in mail, behind mail.ru.

Yandex LLC became profitable in November 2002. In 2004, Yandex sales increased to $17M, which was 10 times greater than the company’s revenue just 2 years earlier. The net income of the company in 2004 constituted $7M. In June 2006, the weekly revenue of Yandex. Direct context ads system exceeded $1M. All of Yandex’s accounting measures have been audited by Deloitte Touche since 1999.

Yandex has grown revenue at a 59% from 2006 to 2010, to $440M in 2010. Adjusted EBITDA and adjusted net income were $217M and $140M respectively in 2010. The company derives the majority of revenue from online advertising. It currently has 58% market share in online advertising, with over 180k advertisers. Revenue at Yandex, most of which comes from advertising, jumped 65 percent in the first three months of 2011 from a year earlier, to 3.89 billion rubles ($138 million), the prospectus showed. Net income increased 62 percent to 820 million rubles.

When comparing Yandex with Chinese peers, such as Baidu, Inc.(BIDU), the offering looks to be an attractive discount based on forward P/E estimates. A better comp, however, would be fellow Russian company Mail.ru, which completed its IPO listing in Nov. 2010, on the London exchange. The company went public at $27.70, and is currently trading at approximately $36. Yandex appears to be coming about in line to a slight discount to Mail.ru on a forward P/E basis, and more of a discount on a forward adjusted EV/EBITDA. The wildcard in the valuation for Mail.ru is that a large portion of the valuation comes from its minority interests in such companies as Facebook, Groupon and Zynga. However, the underlying business of Yandex is arguably stronger and faster growing than that of Mail.ru.

The Yandex offering also faces some risks associated with operating within Russia. There has continually been some concern about Russian political risk. However, it appears that investors seeking growth and exposure to the fast growing Russian Internet sector are willing to take this risk. The Yandex offering has been highly anticipated for the last three years, when the company’s intentions to go public were originally announced, and based on heavy demand for the offering it appears to be in line to be yet another successful Internet IPO. Who knows, Yandex could eventually become a takeover target for Google if the Californian giant struggles to grow market share in Russia.

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LinkedIn IPO May 19th

Tuesday, May 10th, 2011

Earlier Monday of May the 9th, in an amended regulatory filing, LinkedIn said it plans on offering about 7.84 million shares, at a price ranging from $32 to $35 a share, valuing the company at more than $3 billion on May 19.  About 4.83 million shares will be offered by the company, which should garner anywhere from $154 million to $169 million from the IPO, based on this current price range. Analysts expect the offering to be priced sometime next week. LinkedIn will trade on the New York Stock Exchange under the symbol “LNKD.” Lead underwriters on the deal are Morgan Stanley, Bank of America Merrill Lynch and J.P. Morgan. The underwriters will be able to purchase an additional 1.176 million shares to cover over-allotments.

The three investors are selling their entire stakes. Goldman Sachs Group Inc., which also has made a big bet on Facebook Inc., is selling its entire stake of 871,840 shares; McGraw Hill Cos. is selling all of its 435,920 shares; and SVB Financial Group, a financial-services firm, will sell all of its 70,365 shares. Executives and board members are selling a total of 387,170 shares in the offering. Chairman and co-founder Reid Hoffman and CEO Jeffrey Weiner are each selling 115,335 shares in the offering, worth at least $3.7 million at the lower end of the offering range. That makes it a total of 1,765,295 shares that will be sold back into the market. That doesn’t even include employees or other small investors that plan to follow suit. Appreciate the disclosure, but this does not bode well.

LinkedIn generates revenue both from corporate customers who use its’ hiring solutions and from users who subscribe to its premium services, though basic membership remains free of charge. The company said it had 2010 revenue of $243 million, double that of the prior year, while it swung to a full-year profit of $15.4 million, compared with a year-earlier net loss of $3.98 million.

For the quarter ended March 31, LinkedIn said revenue jumped 110% to $93.9 million while earnings climbed 16% to $2.1 million. Operating expenses surged 123% to $92.65 million in the March quarter. Operating expense surge over 100% is a no-no. That may be amounted to 100% hiring spree from 500 employees to 1,000. In a government filing, LinkedIn warned that it expects its revenue growth rate to decline and its costs to rise as it ramps up hiring and re-invests in the business, and that it will lose money this year. It cautioned that it “may not be able to generate sufficient revenue to sustain our profitability over the long term.” LinkedIn makes money selling members premium subscription services, and hiring and marketing services.

The debut of the social network for professionals founded by ex-PayPal executive Reid Hoffman values the nine-year-old firm at $3 billion. At about 12 times 2010 sales, its IPO is cheap compared to 78 times for Renren, the Chinese site often likened to Facebook. Companies including Twitter, Groupon and Zynga have stoked heavy interest from investors betting on social media only getting hotter. Their shares, traded in markets for private investors, are commanding multi-billion-dollar valuations. Last week, Renren Inc, one of China’s biggest social networking companies, rose 29 percent in its debut on the New York Stock Exchange. In contrast, Renren’s shares are trading at slightly more than 78 times the estimated annualized sales for the six months that ended December 31, 2010. Facebook is valued at 35 times last year’s sales. Since then, Renn has given back it’s surge to fall back to it’s $14 offering. The true valuation for RenRen is somewhere around the $10-$12 mark, but we’ll discuss about the markets overheating social network interest at a later time.

LinkedIn is valued at a discount to peers, but as a social network, it is priced several times more than the likes of Google’s and Yahoo’s 4 to 5 times sales. I feel LinkedIn may be limited and constrained to how Profitable it can be in its current business model.

LinkedIn Facts

  • The site officially launched on May 5, 2003. At the end of the first month in operation, LinkedIn had a total of 4,500 members in the network.
  • Roughly one million new members join LinkedIn every week, at a rate equivalent to a professional joining the site faster than one member per second.
  • The company is privately held and has a diversified business model with revenues coming from user subscriptions, advertising sales and hiring solutions.
  • LinkedIn operates the world’s largest professional network on the Internet with more than 100 million members in over 200 countries and territories.
  • More than half of LinkedIn members are currently located outside of the United States.
  • There were nearly two billion people searches on LinkedIn in 2010.
  • Headquartered in Mountain View, Calif., LinkedIn also has U.S. offices in San Francisco, Chicago, New York and Omaha, Neb. International LinkedIn offices are located in Amsterdam, Dublin, London, Paris, Sydney, Toronto and Mumbai, India.
  • The company’s management team is comprised of seasoned executives from companies like Yahoo!, Google, Microsoft, TiVo, PayPal and Electronic Arts. The CEO of LinkedIn is Jeff Weiner.
  • LinkedIn is currently available in six languages: English, French, German, Italian, Portuguese and Spanish.
  • LinkedIn started off 2011 with about 1,000 full-time employees located all around the globe, up from around 500 at the beginning of 2010.

Worldwide Membership

  • 100m+ professionals around the world as of March 2011
  • 20m+ members in Europe as of December 2010
  • 5m+ members in the UK as of December 2010
  • 1m+ members in France
  • 2m+ members in the Netherlands
  • 1m+ members in Italy
  • 1m+ members in the DACH region (Germany, Austria and Switzerland)
  • 1m+ members in Spain
  • 9m+ members in India
  • 3m+ members in Canada
  • 3m+ members in Brazil
  • 2m+ members in Australia
  • As of April 2011, LinkedIn counts more than 11 million recent college graduates* around the world as members (*LinkedIn defines recent graduates as members who have graduated within the last five years–between 2005 and 2010.).

LinkedIn and Business

  • As of January 2011, LinkedIn counts executives from all 2010 Fortune 500 companies as members; its hiring solutions were used by 73 of the Fortune 100 companies as of March 22, 2011.
  • More than 2 million companies have LinkedIn Company Pages.
  • LinkedIn represents a valuable demographic for marketers with an affluent & influential membership.
  • Thousands of developers are using LinkedIn APIs to create innovative tools and services for professionals.

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Coinstar (NASDAQ:CSTR) To Offer Video Game Rentals

Thursday, April 28th, 2011

Dealing yet another blow to GameStop (NASDAQ:GME) down 4%, Coinstar aka RedBox (NASDAQ:CSTR) up 8.50% afterhours, is  now offering video game rentals. GameStop gained momentum when BlockBuster accelerated closings of its brick and mortar stores. See this report predicting BlockBuster, Eastman Kodak (NYSE:EK) and GameStop demise as the Internet and automated boxes take hold of the market. 

Redbox, America’s movie rental destination, today announced it will offer video game rentalsat more than 21,000 redbox locations nationwide beginning June 17, 2011. Top video games will join new release movies for only $2 a day complementing $1 DVD and $1.50 Blu-ray” daily rental prices. The announcement follows a test of video game rentals in select U.S. markets that began in August 2009.

“Redbox will increase consumers’ access to video game rentals by leveraging our incredible technology and businessmodel to keep rental prices low for consumers,” said Mitch Lowe, president, redbox. “With more than 21,000 redbox locations slated to feature video game rentals alongside movies this June, redbox will be the one-stop shop for entertainment.”

Redbox, a Coinstar, Inc. brand, has tested video game rentals alongside movies at 5,000 redbox locations. “Redbox has rented more than one million video games in less than two years at these locations, underscoring the popularity of video game play in America,” added Lowe.

Today, nearly 64 percent* of people in the United States own a game console.

Upon launch, redbox will feature games across the three major console platforms: PLAYSTATION 3, Nintendo Wii” and Xbox 360. Video game titles will range from top releases to popular family and kids titles.

“Redbox will make discovering the latest games as easy as a trip to the local grocery, convenience or drug store,” said Joel Resnik, vice president, games, redbox.

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Dish Networks Buys BlockBuster Rental

Wednesday, April 6th, 2011
 ALT
 
Article in the Financial Times. I wrote a report back in March 11th of 2010 of BlockBuster’s demise. Read here
 
Blockbuster once dominated the home video and DVD rental market in the US but has lost ground to mail-order DVD services such as Netflix, online offerings from Apple and others, and on-demand options from cable and satellite providers, including Dish Network
In September it filed for bankruptcy protection with debt of more than $1.4bn and assets of $1bn. Despite a last-ditch marketing effort that emphasised its own mail-order and streaming options, which have failed to catch on, the company continued to close stores.

Dish (NASDAQ:DISH) won the bankruptcy auction with a bid valued at $320m. After closing costs and adjustments for cash and inventory, Dish Network expects to pay about $228m, and said the deal would close in the second quarter.

In the bankruptcy auction, which took place on Tuesday in New York, Dish faced competition from activist investor Carl Icahn, who already owns a large block of Blockbuster senior notes. Also bidding was a group of creditors known as Cobalt Video, which included Monarch Alternative Capital, according to the New York Times.

In announcing the deal, Dish Network made it sound as if it might seek to preserve the Blockbuster brand.

“With its more than 1,700 store locations, a highly recognisable brand and multiple methods of delivery, Blockbuster will complement our existing video offerings while presenting cross-marketing and service extension opportunities for Dish Network,” said Tom Cullen, executive vice president of sales, marketing and programming for Dish Network. “While Blockbuster’s business faces significant challenges, we look forward to working with its employees to re-establish Blockbuster’s brand as a leader in video entertainment.” But given the troubles Blockbuster has faced in recent years, analysts were not certain what Dish Network, led by billionaire founder Charles Ergen, would do with the struggling brand.

Dish Network does have a well-recognised brand and Ergen could attempt to reorganise the company into a Netflix-like entity which would stream video content while continuing with DVD rentals, or offer Blockbuster services for a fee to current and future Dish subscribers in his efforts to fight churn and improve his current offering.

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