A Sitting Dot Com?by
With Terra Networks' acquisition of Lycos, are there more buyouts brewing in the beleaguered dot-com world? Some pros think so, mainly because of the countless market casualties among the Internet companies. "Dot-coms that have been shot down but whose franchises are profitable--or about to make money--are the likely targets," says Dan Veru of Palisade Capital Management.
He has been loading up on About.com (BOUT), which he thinks may be buyout bait. About.com, an entertainment, news, and info network, has 700 sites covering 50,000 topics. Each site is managed by experts, who write articles and host live chats. "Their value to advertisers is compelling," says Internet maven James Kiggen of Donaldson Lufkin & Jenrette Securities.
Like many other dot-coms, About.com was flying high, with its stock bolting from 40 in December to 101 on Mar. 14. But a month later, it plunged to 25. It has since recovered to 44 on May 17. Part of the upswing is due to improving numbers, but Veru thinks investors are also starting to sniff a deal.
Now that Viacom has finished buying CBS, Veru believes Viacom's next move will be a run for About.com. A year ago, he says, CBS was rumored to be stalking About.com. He thinks CBS still has its eye on the company.
Ranked among the 10 best Web properties by Media Metrix, About.com will be one of the profitable dot-coms, with cash on its balance sheet of $160 million. DLJ's Kiggen sees About.com making money next year, earning 31 cents a share. His 12-month target for the stock: 150. Chairman and CEO Scott Kurnit says: "We have talked to interested parties, but we don't see the urgency to seek a combination based on our near profitability and cash on hand." Viacom declined comment.