Is 24/7 Media Out of Time?
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As the online marketing and ad industry waits for one of its largest players to post earnings later Wednesday, questions remain about its short-term viability, and about the company's efforts to make it to profitability.
In February, New York-based 24/7 Media delayed its fourth quarter and 2000 earnings report until Wednesday, saying that it was looking at "strategic alternatives" regarding its cash position.
In investor relations parlance, that typically means that executives are seeking ways out of a cash crunch that could range from private investment to a buyer of portions or all of its business. A failure to do that could even result in a filing for bankruptcy protection.
The company ended its third quarter with $23.1 million in cash and cash equivalents, after posting a loss of $22.5 million, or $0.59 per share.
The company maintains positions in several public companies, including chinadotcom, with which 24/7 Media operates an Asian subsidiary. All told, the company had about $90 million in marketable securities at the end of third quarter. Those investments are now worth about $12.3 million.
So at its current burn rate (and not including one-time charges, like severance), the company will not have enough cash to make it to profitability, potentially going through its cash reserves and equity positions sometime during first quarter 2001 -- three quarters before it expects to turn a profit.
Thus, the question is raised: what can 24/7 Media do to stay in business?
Supporting its remaining an independent operation are a sizable headcount-reduction plan -- expected to shave about $20 million annually through the cutting of about 200 employees from the payroll -- and what executives have said are "aggressive" efforts to raise cash.
They could entail a sale of one of 24/7 Media's more appealing units. In addition to its 25 million e-mail addresses and ad-serving technology, 24/7 Media also has a broadband services unit that might appeal to potential acquirers, especially in the interactive TV space. The division handles broadband technology consulting and media and ad delivery.
In an interview with internetnews.com's Internet Advertising Report earlier this month, an executive suggested that offline marketers or "big media companies" might be interested in acquiring 24/7 Media outright, since the business community is coming to understand the online marketing arena.
Chief operating officer and president Tom Detmer also hinted that CRM, research and financial transaction firms like Equifax and Experian might be interested in making 24/7 Media into a unit of their organizations. (Detmer served as president of BehaviorBank/Atlantes, a company that Experian acquired in 1997.)
The company said in December that it projected fourth-quarter revenue in the $48 million to $55 million range, and a loss of $0.39 to $0.44 per-share loss, roughly $14.9 million to $16.8 million. It has not given any indication since then whether it still expects to meet those predictions.
And with a hazy outlook at present, investors will have to rely on 24/7 Media's announcement later on Wednesday to see whether it's landed private investors or succeeding in selling a portion of its business -- factors that most likely will determine its fate.