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24/7 Media: Going to Bounce Checks?

In late 1998, eBay's stock had gone from an IPO price of $18 to a staggering $82.50. Crazy. Insane. Unsustainable. That's what Barron's thought. The title of the article was "Wall Street's Love Affair with eBay Could Be a Fling, Not a Long-Term Romance." After all, the stock had a market capitalization of $3.2 billion. Oh well. Of course, now the stock has a market capitalization of $15 billion.

For the most part, Barron's tends to be a reliable contrary indicator. So when Barron's released its latest report on companies that are nearing financial death status, I was excited. Perhaps there are some good stock ideas.

To be fair, estimating the life of a company is no easy feat. There may be a surge in revenues, there may be large investment gains, there may be a hugely successful new product launch and so on. In other words, focusing solely on burn-rates is not necessarily wise.

Ranked #33 on the Barron's list is 24/7 Media . The company is a complete provider of online advertising solutions. For example, it does such things as ad serving, promotions, email list management, email list brokerage, data analysis, and loyalty marketing. But according to Barron's, the company will expire in under seven months.

Quick to respond, 24/7 has argued its case in a press release. While the company has $25 million in cash, there is more. In an acquisition of Exactis.com, 24/7 will get an additional $40 million in cash. What's more, 24/7 has had some savvy investments. It owns 5.7 million shares of China.com and 4.3 million shares of Network Commerce (the total value is $140 million). According to 24/7, it has enough cash to allow the company to reach break-even on a cash basis.

When is break-even? Well, it is not soon. It is projected to be in the first half of 2002. To me, this needs to be reduced. In the Internet world, a few years can be an eternity. Companies can deteriorate quickly. Besides, the competitive landscape will continue to increase, especially in 24/7 Media's market space.

So while the methodology of Barron's may be suspect, the premise is correct. Companies need to strive hard to reach break-even soon. If the list helps companies do this, it will - even though I like to trounce on Barron's - be a good thing.



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