2HRS2GO: Microsoft should continue dealmaking
You can't blame today's Ticketmaster Online-CitySearch Inc. (Nasdaq: TMCS) shareholders for being excited.
Today's Microsoft announcement not only eliminates Citysearch's most visible rival, it actually co-opts it, since Microsoft hands over MSN.com's local entertainment listings to CitySearch and jumps on board as an investor. The brand-building advantages of prominence on one of the most visited Web portals easily justifies the dilutive effects of issuing another 11.5 million shares of TMCS.
  |
| Have an opinion on this? |
|
 |
Aside from the obvious cost savings and higher advertising rates available to an engorged and more widely distributed CitySearch, getting Microsoft aboard as an investor also gives the business a second source of capital to top into for future expansion. We've come to expect such moves from Barry Diller, who's built a career on playing with other people's money (usually the public stock market's) to fashion media giants.
Supposed advantages of most Big Media-plus-Web combinations remain unproven to me, but I've always liked Ticketmaster CitySearch. Actually, I often use CitySearch and Sidewalk to see what's going on around the Bay Area. Both sites are slickly designed with surprisingly robust content, especially considering the latter is an offering from the company once described by one Steve Jobs as having no taste. It's easy to see why newspapers see these local guides as such threats; the San Francisco Newspaper Agency's own web offering, SFGate, while offering a handy compilation of news from the day's print editions, falls far short in restaurant and entertainment listings.
TMCS's financial statements hold little joy, especially with the company carrying more than $300 million in goodwill that will take 10 years to write down. But on the whole, TMCS's books don't look much worse than those of your average Web company. And unlike other sites that talk about e-commerce, TMCS truly lives it, with ticket sales making up the vast bulk of its revenue. Getting MSN exposure gives Ticketmaster an even wider audience to tap into, so I wouldn't worry much about that.
More curious is what comes up next for Microsoft. Speculators have buzzed about Microsoft's Internet plans since last week's revelation that the Redmond giant thought about offering a tracking stock for its online assets. With Gates & Co. now bailing out of the local entertainment field, it's reasonable to wonder how far Microsoft will go to cut its losses in the online content field. The company can't find a suitable leader for the group, which doesn't mesh very well with Microsoft's main business of software creation.
The paradox is that Microsoft's Web package is actually pretty good in some areas. Aside from the aforementioned Sidewalk, quality offerings (MSNBC doesn't count as part of the consideration, since it's a joint venture that's as much an NBC project as a Microsoft one) include Microsoft Investor, which features well-written articles and a set of charting and portfolio tools that can only be described as excellent for the price (free); the Expedia travel site and its easy to use interface, although judging by the prices I can get on other sites (Cheaptickets and Priceline, for example), I'm not so sure Expedia provides the best deals; MSN Gaming Zone, which has emerged as one of the most popular online gaming areas of the Internet, even if the majority of chat room inhabitants are in dire need of social skills.
In fact, the weakest portion of MSN is MSN.com itself, about as uninteresting of a page as a professional Web designer can create. That so many new Web users appear each day despite having MSN.com, the default home page for Internet Explorer, as their introduction to the Internet is a testament to PC buyers' determination to explore beyond the boundaries that Web content aggregators would impose. Perhaps the mass populace isn't as lemminglike as Web portals like to think.
Still, with the relatively decent body of work behind MSN.com, it's amazing that Microsoft can't get its money's worth out of it. After a couple of years of failure, Microsoft ought to continue along the path begun today. With earnings due after the bell, this afternoon's conference call would a good as time as any to make the announcement: We're dumping most of our online assets, subcontracting MSN.com's services, and sticking with what we know best; tools, not content.
Other issues:
The overall market retreated ahead of this afternoon's expected quarterly reports. With two hours left in regular trading, the Nasdaq Composite Index was down 28.64 to 2,835.84, the S&P 500 lower 13.78 to 1,405.00, and the Dow Jones Industrial Average down 47.17 to 11,162.67. 22GO>