That strategy seems to have backfired thus far. According to traffic ranking site Alexa, Sconex's page views have plummeted more than 90% since April, when traffic spiked, presumably based on the acquisition publicity. This puts the site's page views far below even its pre-acquisition levels. Then again, Alloy is no stranger to poor acquisitions, with both Dan's Competition (a bicycle equipment retailer) and the ill-fated dELiA*s left in its wake.
That said, the firm's financial picture seems to be improving, based on the latest quarterly results. The firm paid off convertible debenture holders with a cash premium to induce them to convert to Alloy and dELiA*s stock, removing $56.6 million of debt from Alloy's balance sheet and reducing interest expense by $3 million a year. However, this came with substantial cost -- $15.8 million in cash, which drove the company into an ugly net loss of $7 million this quarter. Unfortunately, the top line doesn't look too impressive, either. Revenues grew only about 1% to $63.7 million in the third quarter, which is usually the company's strongest.
With clients like Qwest
With weak growth forecast for next year (high single-digit growth in EBITDA), and a balance sheet that has 55% of its assets in goodwill (higher than the marketing firms mentioned above), I'm not very impressed with this company. With Alloy's incredibly poor prior acquisitions, and the latest one shaping up to be a dud as well, that goodwill is ripe for potential write-downs and further pain for shareholders. Investors would do well to steer clear of this one.
More Alloy Foolishness:
Fool contributor Stephen Ellis does not own shares in any companies mentioned. You can view the stocks he owns and check out his 99th-percentile ranking and CAPS blog in Motley Fool CAPS, the Fool's new stock-rating community. The Motley Fool has a disclosure policy.