CDNow Spinning in Circles

CDNow (CDNW)
sounds like a broken record these days. The music e-tailer is burning
through cash faster than a six pack-a-day habit. The writing’s been on the
wall to cut back on spending for quite some time, but it’s too late to quit
cold-turkey, and CDNow is hittin’ the skids for the last time.


It’ll remain to be seen whether any suitor is in the market to buy used
goods and throw CDNow a life preserver. But investors sure couldn’t care
less, having long since headed for the exits. And the share price tells a
tale of woe, bobbing at an underwhelming four bucks a pop.


The problem is, it’s hard to feel much sympathy here. It’s latest quarter
looks a lot like the same deadbeat of old, hemorrhaging $38 million, same
as last quarter, despite just $38 million left under the mattress. That’s
$28 million in hard currency and a loan-shark credit line of about $10
million.


CDNow plans to shed some marketing expenses and it’s scrambling for a sugar
daddy, but the wallet’s a little light at the moment. Auditors reading the
tea leaves anticipate a going-out-of-business fire sale in the company’s
future.


On the bright side, there’s nearly 4 million eyeballs left for a potential
buyer on eBay (EBAY)
. Not too shabby, but with few barriers to entry, and an 800-pound
Amazonian gorilla laughing all the way to the bank, it makes little
difference. Any way you slice it, you can put a fork in this one. CDNow is
done.


On the brighter side of M&A watercooler chat, some funny business caught my
eye while browsing NBCi’s latest press release. It seems the company has
quietly tweaked its image. “NBC Internet, a leading Internet company
connecting buyers to sellers.” That’s sounding suspiciously like B2B
word-smithing from a decidedly pure content play. Albeit a day late and a
dollar short. But I digress.


Anyhow, NBCi announced plans to acquire Husdawg Communications.
Terms of the deal were kept under wraps. The move looks to combine Husdawg with NBCi’s mailing list
management and database marketing division, NBCi Direct.


NBCi Direct touts itself as a high-brow cyber-mailing list, boasting 9
million Web surfers who’ve opted in to receive targeted e-commerce
offerings. Sounds impressive, but I’ve got an entire box filled with this
junk mail.


I don’t remember agreeing to receive all these crazy offers, but I do have
a short attention span and an itchy trigger finger. “Save Big on Color
Scanner with a Hot Rebate!” I don’t know about you, but these things scream
at me like a used-car sales pitch. And probably to most of the 9 million
who signed up on the fly, but now can’t figure out how to unsubscribe.


You’ll all recognize Husdawg’s bread and butter when you finish downloading
that latest bootleg copy of software you just scored. You know that
annoying electronic registration card you encounter after installing
shareware that no one ever fills out? That’s Husdawg’s gig.


These cards are annoying enough falling all over the floor while I’m
thumbing through my favorite magazine. Of course, maybe it’s just me. After
all, I have been known to be a picky and uncooperative consumer from time
to time.


Investors seemed to cheerlead the deal, but it’s worth noting that shares
of NBCi are sagging 80% off its 52-week high on the most anemic volume seen
in nearly a month. So the response could just be a handful of
bottom-feeders. As for me, the deal looks so-so, adding marginal
shareholder value. But if it boosts the bottom line, who am I to argue?


Any questions or comments, love letters or hate mail? As always, feel free
to forward them to [email protected].


















DealTracker scorecard: NBC
Internet/Husdawg Communications

Investor
sentiment
B-
Terms of the
deal
n/a
Industry
outlook
C
Overall
scorecard
C+

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