By Erin Joyce
Web measurement firm Jupiter Media Metrix
continues to hold auction-type sales meetings with potential suitors in an attempt to sell off some or all of its assets before its cash runs out.
A company spokesman said there are interested parties looking at doing possible deals for the Internet measurement and research company’s assets; whether Jupiter was close to getting a sale done in the next few weeks or days, however, was unclear.
Sources familiar with the company and the process say plenty of suitors are taking a look at the company’s assets but may be held up trying to figure the worth on a lot of “soft” assets.
As desirable as business lines such as Web measurement, research and online ad campaign measurement may be to, say, advertising holding companies looking to bolster their online-focused research, the most prized asset in the company is among its most intangible: a pending lawsuit against its onetime acquirer.
Jupiter filed a lawsuit against Milpitas, Calif.-based NetRatings in March of 2001, charging that NetRatings violated its patent for tracking online Web usage. The lawsuit was left in limbo after the two companies announced their merger intentions. But when federal regulators raised objections over two market leaders in Web measurement joining forces, Jupiter moved to put its litigation back on track in case the deal was scuttled. They called off their merger in February.
Jupiter has not asked for a specific amount in the complaint; but if the company were to prevail in asserting that NetRatings infringed its Web measurement patent, which was awarded in September of 2000, the damages could potentially reach into the hundreds of millions of dollars, easily making the action among the company’s most prized potential assets.
Otherwise, the four main business lines up for grabs include Jupiter’s research such as how various industry sectors use the Internet, Media Metrix Web audience measurement data, online advertising measurement service AdRelevance and campaign analysis products from Campaign Analysis.
In addition to getting suitors interested in buying parts of the company’s assets, Jupiter is laboring with just over $101 million worth of real estate lease obligations on its balance sheet, contracts for hundreds of thousands of square feet left over from the firm’s heady growth and acquisition days before the April, 2000 Nasdaq sell off.
It could be one factor holding up potential deals, which the company knows it has to cut soon now that its auditor has raised doubts about Jupiter’s ability to make a go of it for much longer.
“As a result of continuing unfavorable market conditions in our business segments and our continuing losses, we are in the process of disposing of certain of our business units,” the company said in its annual report filed Monday. “Unless we are able to dispose of certain of our business units and reduce our losses, our ability to continue as a going concern is in doubt.”
As of February 28, 2002, the company had about $7.5 million of cash and cash equivalents and $1.4 million of marketable securities, according to its annual report.
In addition, it still has about $6.8 million locked up in letters of credit related to security deposits on real estate leases.
Jupiters’ loss from operations for 2001 was $516.4 million, driven largely by amortization costs of $411.3 million related to new accounting rules on how quickly amortization of goodwill on past acquisitions can be charged off.
Since Jupiter and NetRatings called off their $71.2 million merger plans in February, essentially because Jupiter didn’t have the money to overcome Federal Trade Commission anti-trust objections about the merger, the company has been in search of a White Knight.
In recent weeks, word surfaced that comScore Networks might be interested in buying a chunk. According to Media Buyer’s Daily, the chairman of the research company said he might be interested in buying some of the Media Metrix assets. But since March 7 when the story ran, there has been no new word on a deal.
Despite the cash crunch facing Jupiter, Ken Marlin of mergers and acquisition firm Marlin and Associates said Jupiter has a gem in the Web measurement tools it’s looking to sell.
“That’s still an important capability, an important ingredient that a number of market research firms still lack,” he said. Plus, cutting a deal in the current market is difficult because companies that buy Jupiter’s research are hurting financially right now.
“As customers have cut back in spending, market research is the first thing to go. But everybody understands that’s temporary.”
There are plenty of firms, including big advertising holding companies such as Omnicom that need to bolster their strength in online research, he said. In addition, Marlin notes that Jupiter’s chairman Tod Johnson is also chairman and CEO of market research firm NPD Group, Inc., which has cash reserves to lend to Jupiter again if need be.
“He has significant other resources” to draw from on behalf of Jupiter, Marlin said. “Johnson is a savvy, very knowledgeable businessman, and he is not likely to let short term pressures force him into a solution that isn’t the smartest long term solution. And at Jupiter’s current share price (15 cents), he’s capable of putting money into the company.”
Marlin said he’s not surprised that the company has yet to announce a deal given the economic conditions for Internet services in general, but he said that doesn’t mean that Jupiter won’t be able to do one either.