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Juno: Picking Up the Scraps

Juno Online Services is a hybrid ISP, offering both free and premium services. But the stock has been on a wild ride. The 52-week range is $5-3/4 to $87. Currently, the company has a market capitalization of $435 million.

But the company is showing strong revenue growth. In the past quarter, revenues were $24 million, which was a 147% increase from the same quarter a year ago. The company generates revenues from a combination of subscriptions, advertising and e-commerce.

Also, the company has been lucky, as it was able to raise $81.1 million in a follow-on offering in February (just before the Nasdaq plunge). There is about $128.8 million in the bank. And losses are not outrageous. In the past quarter, the company lost $2.9 million.

In the past quarter, Juno had more than 3 million active subscribers. This places Juno as the third largest ISP (AOL and Earthlink are larger).

Juno has been able to leverage its massive user base into some major deals. Take its recent deal with Hughes Network Systems. Users can now use Juno services through the Hughes broadband satellite network. Broadband? Yep. Juno has developed a broadband version of its service. With the service, users get access speeds of 400 KB per second (downstream).

Juno is definitely in a tough market. However, this can be an advantage. Juno is in a position to be a vulture buyer - getting assets at sweat heart prices. Recently, for example, Juno purchased the subscriber base of WorldSpy, which ran out of money (there were 260,000 users). Juno also bought the user base of Freewwweb, which also ran out of money. Both deals did not have to be disclosed, because they were nonmaterial (that is, cheap).

As other such companies run out of money, Juno will continue to pick-up the scraps and build its user base. True, this is brutal, but it has been working. But ultimately, Juno will probably be a buyout candidate itself. The large user base and reduced valuation should be attractive to much bigger companies, like AOL.