After a wild week that saw the markets storm back from their recent descent then finish off with a whimper, we all deserve to take the weekend off. Watch some NCAA basketball, read our new mutual funds newsletter -- it's free -- and go out and enjoy the sunshine.
We'll see you back here on Monday.
In today's Motley Fool Take:
- Yahoo! Goes European
- Shameless Plug: Save $5 on Your Credit Report
- Dynegy's First-Time Loser
- Quote of Note
- Coup d'E*Trade
- Discussion Board of the Day: Discount Brokers
- More on Fool.com Today
By Brian Gorman
The five-year-old European firm has been profitable since the fourth quarter of 2002 and its revenues more than tripled last year. Kelkoo, which operates in nine countries and reaches 10% of all Internet users in the European block, claims it is the largest e-commerce service originating in Europe.
All of this makes Kelkoo a solid vehicle for Yahoo! in Europe, but the size of the deal, which Yahoo! has said is subject to undisclosed adjustments, still seems fairly eye-popping. Consider that the European company's 2003 revenue was just $53 million, meaning Yahoo! is buying Kelkoo for a whopping 11 times trailing sales.
Compare that with the online titan's 2003 purchase of Overture Services, its last major acquisition. That deal's $1.63 billion price tag amounted to less than two-and-a-half times 2002 sales. Granted, Overture's top-line rise for the first six months of 2003 was "just" 66%, following a 131% increase from 2001 to 2002. All the same, Overture was expanding off a far larger base.
Perhaps more significantly, Yahoo! used more than $1 billion in stock as currency in the Overture transaction and none in the Kelkoo buy. The Internet giant's shares are up 46% since the Overture deal was announced, although its P/E is actually lower today than it was then. Nevertheless, with shares at current levels, buying with stock seems to make a lot of sense. Yahoo!'s willingness to foot the bill by dipping into its $1.3 billion in cash and short-term investments suggests the purchase was a priority.
Comparison shopping certainly has been a driver for Yahoo! of late. The company added new search capabilities to the shopping zone last year before Christmas. The result was a "dramatic acceleration" in growth rates for referrals to Yahoo! shopping that surpassed the firm's own expectations.
The Kelkoo deal appears to be a bid to take that success across the ocean. Kelkoo's profitability also may have played into Yahoo!'s interest. Based on the admittedly very limited numbers available, Kelkoo looks like it carries pretty high margins.
At 127 times trailing earnings, Yahoo!'s stock is hardly cheap, but that hasn't stopped investors in the past. If Kelkoo can maintain its current growth rate, Yahoo! may see some upside. In that case, shareholders should petition to have an exclamation point added to the European outfit's name.
Fool contributor Brian Gorman does not own shares of any companies mentioned here.
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Dynegy's First-Time Loser
By Bill Mann (TMF Otter)
Don't get me wrong, because I'm pleased as punch that someone who used his corporate position to defraud shareholders is being sent away for a long, long time.
But if I use the "relative penalty" approach, I've got to wonder whatDynegy's
Twenty-four years in the big house?! Wow. Olis was also convicted on federal, not state, charges. So, while he can get some time shaved off for good behavior -- about three years -- there's no such thing as parole. Even the judge seemed sympathetic, saying at the sentencing that "sometimes good people commit bad acts, and that's what happened in this case."
Olis was found guilty of perpetrating a fraud on Dynegy shareholders, one called "Project Alpha," which was essentially a series of entities that Olis created to treat debt on Dynegy's balance sheet as financing. This allowed the company to conceal debt and treat it as cash flows generated from its gas trading activities. Each of the entities created for Project Alpha was completely dependent upon Dynegy, and there should have been no question that the $300 million affected by these moves were the company's liabilities. The company's stock declined by more than 85% between January and July 2002, and has yet to fully recover.
Under sentencing guidelines, judges in white-collar cases must consider how much shareholder value was lost as a result of the fraud. This is the next best thing to impossible in this case, as it should be pretty clear that there were monumental problems throughout the energy trading businesses, with almost every company that joined the fray -- from Duke Energy
Dynegy was no different, though few recognized the risks at the time. How much of its meltdown happened on account of Olis' actions? According to the judge, the answer is about 24 years' worth. Compared to the relatively light sanctions that our friends the garbage merchants on Wall Street have had to endure, this seems like overkill.
Bill Mann's got another word for "garbage" in mind. He holds none of the companies mentioned.
Quote of Note
"Consider the daffodil. And while you're doing that, I'll be over here, looking through your stuff." -- Jack Handey, Deep Thoughts
By Rick Aristotle Munarriz (TMF Edible)
Talk about your executions! No sooner had E*Trade
FleetBoston had to go. Bank of America
We've come a long way, Fool!
It was tricky for a while there, but a steady flight back into stocks coupled with a growing online populace have discount brokers back in vogue. This is reflected clearly in the stock performance of dot-com specialists like Ameritrade
Our Broker Center has been a key part of our site through it all. We view empowering the individual investor as a worthy cause, and discount brokers play a role. That it's E*Trade going into the index is especially cool. Leading discount broker Charles Schwab
E*Trade promotion to the big index is an endorsement for online brokers everywhere. The thrifty and self-sufficient have been heard.
Longtime Fool contributor Rick Munarriz has used online discount brokers since 1991. He likes the sector's chances but he does not own shares in any companies mentioned in this story.
Discussion Board of the Day: Discount Brokers
Is finding a new broker as complicated as it seems? No. Have you checked out our Broker Comparison Table lately? Who is the best discount broker for you? All this and more -- in the Discount Brokers discussion board. Only on Fool.com.
More on Fool.com Today
Sharpen your skills by learning from the heaviest hitters in the world of value investing. Join our Spring Training for Value Investors.... A new service may spark higher sales, but should investors fly with this revamped dot-com? See for yourself in Priceline's New Math.... Welcome to the 21st century, mon Fool. Here are the ins and outs of Paying Taxes Electronically.
In other news:
- Human Genome Getting on Track
- PeopleSoft's People Speak Up
- THQ Scores Bonus
- Dynegy's First-Time Loser
For a list of all our stories from today, see our Today's Headlines page.
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