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24/7 Media Looking to Drop European Unit

Silicon Alley-based ad network 24/7 Media aims to cut its losses in Europe and is looking for a buyer or strategic partner to shoulder the burden of its European division, executives said Wednesday evening.

During a conference call with analysts and investors, chief executive David Moore said that in addition to recent layoffs and divestitures of the company's Exactis, AwardTrack and Sabela Media divisions, the firm is considering new ways to conserve cash.

In addition to the whole or partial sale of the company's European unit -- principally comprised of media and e-mail sales offices -- Moore added that the firm is also seeking ways to sell its broadband services division. That's the same unit that a former executive described as a potential future cash cow for the company, just months ago.

However, Moore said both the company's broadband unit -- which handles consulting and media delivery -- and the European division were "outside of our strategic focus."

With the appointment of new chief operating officer Tony Plesner, that strategic focus has increasingly been on the company's e-mail list businesses, its Connect ad serving and Website Result search engine optimization technology, and its network of online ad inventory.

Now, following Wednesday's announcement, that focus evidently is further constrained to the U.S. markets.

The future of the company's broadband unit is uncertain, since interactive TV and related services are still some time away from becoming lucrative business.

On the other hand, some transaction involving 24/7 Media Europe seems very likely. Rumors have been flying for several weeks about a potential suitor for the division, though the company's U.S. and European executives routinely declined to comment on the subject.

One likely candidate for a purchase of the unit is ad pepper media, a Europe-focused ad network and media rep firm. Others include major regional media players like Vivendi or Bertelsmann. And of course, there are U.S.-based competitors, of which DoubleClick is the most willing (and able) to make acquisitions. Last month, DoubleClick bought 24/7 Media's Sydney, Australia-based Sabela.

Another contender is New York-based Real Media. That company's cash situation is unknown, but it has a parent in European ad sales powerhouse PubliGroupe, and in recent weeks has stepped up its focus on the region.

Indeed, Moore said 24/7 has seen "strong interest in each property," though he and other spokespeople declined to discuss further details, aside from saying the company expects at least one deal to close in third quarter.

"Such a divestiture would significantly improve our cash burn, add to our cash reserves, create valuable partnerships and rev opportunities, and allow us to focus on our core products," Moore said.

More specifically, it would also slim down operating expenses in the form of personnel: 24/7 Media currently employees some 600 worldwide, and cuts of both its broadband and European divisions would cut about 60 percent of its workforce.

The news came in conjunction with updated guidance on 24/7 Media's earnings outlook. The company lowered revenue expectations but also cut its estimates for expenses. As a result, the company now predicts a $0.46 per share loss for second quarter, up from first quarter's $0.58 loss, and an improvement from earlier expectations of a $0.52 per share loss for Q2.