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In today's Motley Fool Take:

DoubleClick Waves the White Flag


Tom Taulli

DoubleClick (Nasdaq: DCLK) is considered one of the dot-com survivors. The problem is that it has never moved beyond survival mode. While other companies in the online advertising space like Yahoo!(Nasdaq: YHOO) and Google(Nasdaq: GOOG) are hitting home runs, DoubleClick can't even manage, well, a double.

For example, in DoubleClick's latest quarterly report, the company was able to meet expectations with profits of $15.4 million in the third quarter. This compares to a profit of $6.3 million in the same period a year ago. Unfortunately, it also announced lower guidance for the fourth quarter. Yet again, the stock fell on the news.

Yesterday, DoubleClick pressed the panic button and announced it has hired the investment bank of Lazard Freres & Co. to explore the proverbial "strategic options." Investors certainly liked the move, as the stock price surged 12% to $7.12.

A critical part of the strategy for DoubleClick has been acquisitions. While this has worked for Yahoo!, it has been much more troublesome for DoubleClick. DoubleClick made bets on the wrong sectors, such as direct marketing database providers and advertising management solutions.

Paid search? Well, the company struck out here, too. And, this means DoubleClick is not likely to get much of a premium in an acquisition. Instead, the company is likely to be dismembered -- sold piece by piece to the right types of buyers. Or, it may decide to buy back large amounts of stock or distribute a one-time dividend.

No doubt, the online advertising space is undergoing significant consolidation, as seen with the rumored takeover of MarketWatch(Nasdaq: MKTW) by Yahoo! But while a company like Yahoo! would entertain a pure play like MarketWatch, do not expect the same for the perennially disappointing DoubleClick.

Fool contributor Tom Taulli owns shares of MarketWatch, but none of the other companies mentioned in this article.

Discussion Board of the Day: Women & Investing

Do we need different portals for male and female users? Are there some Wall Street issues that matter more to women than to men? Does gender matter in deciding who will manage your money? All this and more -- in the Women & Investing discussion board. Only on Fool.com.

Thomson Prints Profits


Rich Smith

Six months ago I looked at Canadian publishing powerhouse Thomson(NYSE: TOC) and concluded that it sold at a discount to the market and paid a better dividend, making the company a "buy." I'm not going to reverse that statement based on the company's results posted last week. (They were nothing less than superb.) But at the company's current price, I think the market is no longer pricing this company at a discount. Here's why:

Thomson's growing strong and steady -- nothing less than we've become used to. Third-quarter revenues rose 9% year-on-year; earnings were up 11% to $0.52 per share. What's more, the company generated 25% more free cash flow than in the year-ago period -- $360 million in cold hard cash (and that's in U.S. dollars, too).

Then there's the long-term view. Revenues also rose 9% against the first nine months of 2003. But this time, earnings increased 18%. And free cash didn't just flow -- it rushed forth in a veritable torrent of green, increasing 38% over the year-ago period to reach $691 million. With numbers like those, if you didn't know that Thomson specializes in publishing case law and financial statements, you could be forgiven for thinking the company was in the business of printing money.

The key to valuing Thomson, though, lies in how it increased earnings and free cash flow so much in just a year's time. Longtime followers of the company will not be surprised to learn that much of the growth came from some pretty astute acquisitions: Thomson bought CCBN and TradeWeb to supplement its Financial division and Biosis for its Scientific & Healthcare division. Consequently, those units produced the bulk of the company's growth this quarter, with EBITDA from the Financial division up 21%, from Scientific & Healthcare up 25%. But growth by acquisition -- however smart the buy -- costs money. Net long-term debt has risen $700 million to $3.7 billion since the beginning of the year, and Thomson now sports an enterprise value (EV) of $26.4 billion. Weigh that against a free cash flow run rate of $920 million, and the company's EV/FCF is a hefty 29.

That's a bit of a premium to what the S&P 500 as a whole sells for. And that's OK -- Thomson is a better company than your average S&P 500 large cap. But for the time being, at least, Thomson is no longer an out-and-out bargain.

For more Foolish news & commentary on this legal and financial publishing powerhouse, read:

Fool contributor Rich Smith has no interest, short or long, in Thomson.

Quote of Note

"It is the duty of every citizen according to his best capacities to give validity to his convictions in political affairs." -- Albert Einstein

Humana's Hummin'


Richard Gibbons

Health-care benefits company Humana(NYSE: HUM) showed signs of life Monday when it bounced 6% on news that third-quarter earnings had beaten estimates by 18% and it was raising earnings guidance. In light of this news, Humana may be an example of a company whose improving fundamentals have been overshadowed by high-profile current events.

There are several factors that are worrisome now. First, there's the concern that Spitzer's latest probe may have adverse effects on the entire insurance industry. Consequences could include criminal proceedings, lawsuits against insurers from both customers and shareholders, or insurers being forced to change the way that they were doing business, hurting profits. However, much of Humana's business, such as contracts with the government and large corporations, seems unlikely to be affected by Spitzer's inquiries because typically these deals do not involve commissions.

A second concern is political uncertainty. While national security has been the foremost issue, the cost of health care and the importation of medication from Canada have also been discussed. When such issues become important, the profits of health insurers such as Humana can come under increased scrutiny.

A third concern is competition in the health insurer market. Humana has heaps of competitors, including Aetna(NYSE: AET), Anthem(NYSE: ATH), Sierra Health(NYSE: SIE), and Motley Fool Stock Advisor recommendations UnitedHealth Group(NYSE: UNH) and First Health Group(Nasdaq: FHCC). Plus, health insurance is close to being a commodity, which makes it difficult for any insurer to gain a competitive advantage or particularly high margins. Of these three factors, this one concerns me the most as an investor, as this difficulty is likely to persist indefinitely.

Yet despite these challenges, Humana's latest report is far from sickly. It reflects Humana's efforts to divest itself of nonprofitable business. Medical-expense ratios, defined as medical expenses divided by premiums, fell both sequentially and year-over-year. Profits per share also show nice sequential and year-over-year improvements.

The balance sheet, too, continues to look solid. As Sam Subramanian observed, Humana has loads of cash, which results in it having an enterprise value significantly lower than its market capitalization. Some of this cash is required to run the business, so it cannot be considered money that could potentially be distributed to shareholders. Nevertheless, the cash does result in Humana having an extremely healthy single-digit free cash flow-to-enterprise value ratio. And Humana is using the cash not required by the business in a very shareholder-friendly way: It's buying back shares.

Thus, investors not dissuaded by scary headlines might want to take a closer look at Humana.

Other Motley Fool articles on Humana and health insurers include:

Fool contributor Richard Gibbons, living in Vancouver, wonders whether he could export Canadian medications, but he doesn't own any stocks mentioned in this article.

Content Is Queen


Rick Aristotle Munarriz (TMF Edible)

Content was king until the dot-com bubble called "Checkmate!" Looking at the rosy quarterly report that iVillage(Nasdaq: IVIL) issued last night, maybe it's more appropriate to say that content is queen.

The popular portal that bills itself as "the Internet for women" posted record earnings of $0.02 a share across all of its properties on a 23% uptick in revenues. While that may not seem like much, it marks the third quarter out of the past four in which the company has achieved positive bottom-line results.

With Google(Nasdaq: GOOG) and Yahoo!(Nasdaq: YHOO) coming off stellar reports last month, it should be obvious that advertising money continues to trickle toward the online medium. That's why content is so important.

Want proof? Consider the fact that even though MarketWatch(Nasdaq: MKTW) has seen its shares rise sevenfold over the past three years, it is still a rumored takeover target. While you have some content sites like Salon and drkoop.com wading around the penny stock muck, you would be missing the point if you ignored companies like iVillage that are now growing and profitable.

While iVillage is losing a custom publications project with Wal-Mart(NYSE: WMT) that accounted for 10% of this year's revenues, the company continues to sign up new sponsors, so growth and profitability are likely to continue. With 12.3 million registered users generating 366 million monthly page views, the cash-rich company is attracting the eyeballs that advertisers covet.

So it's not just on the chessboard that a queen can fly circles around the plodding king. In the online world, there's no need to break through any glass ceilings when you are hanging out in the profitable penthouse.

Longtime Fool contributor Rick Munarriz loves women so much that he married one. He does not own shares in any of the companies mentioned in this story.

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