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IAC/InterActiveCorp Message Board

  • jeff44293 jeff44293 Apr 10, 2003 11:23 AM Flag

    Very strongly positive for USAI

    Combining the #1 and #2 seller of online hotel rooms and the #1 seller of online travel with the #2 most profitable seller of online travel makes USAI *the* single best benchmark investment in online travel.

    Short term, yes, we have war aftermath, SARS, business spending down.

    But who here is willing to say they will never travel again? Or that no one will fly again?

    Currently, the shift in booking ONLINE versus over the phone or in person is so strong that even though we are in a weak travel market, it is STILL GROWING OVER 40% YEAR OVER YEAR (source, Media Metrix). Imagine what will happen when people actually start to feel more comfortable flying again.

    Those who believe bulls are living as though its March of 1999 ought to look at themselves in the mirror and ask whether they believe the world will be forever stuck in the malaise that existed on September, 2001. Things are never as rosy, nor as bleak, as they appear.

    And as we emerge from this funk in travel, guess who is going to be standing tall. USAI. In a very big way.

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    • so? in 1999/2000 everything was going $300+ and SEC didn't lift a finger, what makes you think they would now? Just because some people lose their money? That's a given.

    • I appreciate your effort to make some sense out of EXPE and its valuation. However, what is going on right now is not about fair value, market valuation or anything else like that.

      What we have is pure greed and mass manipulation by the management and a group of mutual funds.

      This will continue until either the SEC puts a stop to it (unlikely), or the group involved fill their pockets to a point that they can't fill them anymore.

      Unfortunately, this process may take longer than most contrarian investors can hold on!

    • EXPE Valued $6.4 billion or 16+ times higher than Priceline- valued at $400ml.

      Some say Expedia is a better company than PCLN. But is Expedia worth $6 billion more?
      Compare the Gross Profit of both companies you will get an idea of EXPE's overvaluation,
      Or better yet, would a company or buyer pay $6 billion in cash for EXPE, as the Longs are doing.
      Do people realize that $6 billion equals 6,000 million dollars?

      USAI is not paying cash for EXPE, so maybe it doesn�t matter, they are just printing more shares and diluting the interest of USAI shareholders.

      Why is EXPE valued so much higher than PCLN ?

      PCLN may not be doing as well as EXPE, but how much better is EXPE doing? Conditions are changing in the business, PCLN has made various new deals with hotels and airlines and so has EXPE. Expedia�s new deals have been negative, and have reduced commissions, limited availability of products, and limited how little they can charge for rooms. .
      Expedia�s profit is only $85 ml greater than Pricelines, does that justify a 6000 million dollar greater valuation?

      Compare PCLN to EXPE, using the Gross Profit From Revenue, a very important number.

      EXPE�s Gross Profit from Revenue for the 12 months ending 12/31/02 is only $249 million higher than PCLN�s, yet EXPE is valued at $6.4 BILLION, while PCLN is valued at only $400 ml.
      DOES IT MAKE SENSE THAT FOR $249 million more in Gross Profit, EXPE should be valued at $6000 million more? (Gross Profit from Sales is profit before G&A expenses, and other income and expense). As shown below Expedia had $85 ml more in reported Net Income, and this figure is overstated. Is this $85ml in Net Income worth $6000 million in valuation?

      The Gross Profit from Revenue figure is more important than Sales, in comparing the 2 companies. The companies sometimes book Sales or Revenue in a different manner, therefore looking at the Gross Profit figures may give you a better picture- they are the actual profit from sales before other expenses.
      Financial condition of both companies is similar, PCLN has a strong Balance Sheet no Long Term Debt and also has good cash flow. (Per Yahoo latest posting)

      EXPE 4/15/03: $54.3/sh
      Market Valuation:... $6.4 bn
      Revenue-Sales-booked (12 Mos):....... $590 million
      Valued at 11.8 years of booked Revenue
      Profit (12 Mos):....... $66ml

      PCLN 4/15/03: $1.77/sh (Down from $150.00)
      Market Valuation:... $400 ml
      Revenue Booked (12 Mos):....... $1bnValued at .3 years of Revenue
      Profit (12 Mos):....... $19ml loss

      Gross Profit from Sales- 12 Mos 12/31/02
      EXPE: $401
      PCLN: $152ml
      Difference..............$249ml (EXPE 2.6 time more)
      Net Income (loss)-12 mos 12/31/02

      EXPE: $66ml (profit overstated)
      PCLN: $(19)
      Difference......$85ml (Difference in valuation $5.6 bn)

      Market Valuation-
      EXPE- $6400 ml
      PCLN- ....400 ml
      Difference............$6000ml (EXPE Valued 16 times higher )

      Priceline was Bubble Valued at $150/sh, it is now down over 99%,
      Can EXPE maintain its Bubble valuation?
      Shares Outstanding-
      EXPE: 116 ml- Price $54.30/sh
      PCLN: 225ml- Price $1.77/sh

      Click on below, for EXPE's profits last 7 Quarter.

    • Mr. Diller may have fooled a lot of small and large investors over the last few years. But the question is, can he fool the entire investment community as a whole?,uu[l,a

    • Part 2
      So here's a lesson for investors: When a company hands out tens of millions of options every year and contends through its earnings statement that the things cost nothing, it is telling--there's really no other way to put this--a big stinking lie.
      So how should we account for options? The simplest way is the way the Internal Revenue Service does it. As far as Uncle Sam is concerned, Jack Welch's hypothetical $1 billion gain from exercising options would count as $1 billion in compensation expense for GE. And this is fun: All that compensation expense (which, remember, doesn't even show up on GE's earnings statement) would be tax- deductible....
      This gets at the heart of what's so wrong about the current state of options accounting. It's not that options are bad in and of themselves. Indeed, at companies like Intel, Microsoft, and Cisco, generous options grants have gone hand in hand with spectacular, sustained growth. For startups with little cash but lots of potential, options may well be the fairest way to pay key employees. And the rise of options in the 1980s and 1990s has clearly played at least some role in the transformation of so many big American corporations from stodgy bureaucracies into more agile, investor-friendly beasts.
      But the failure to acknowledge their cost leads to all sorts of strange and counterproductive corporate behavior. Top managers misallocate resources, overpay themselves, and ignore other, possibly better ways of motivating employees--all because giving out options is "free."
      One study, by Harvard law professor Christine Jolls, found a very strong statistical link between options use and share buybacks. There is nothing wrong, per se, with companies buying back their own stock--it can be a good way to return excess cash to shareholders, and can signal that management thinks its stock is cheap. But a bigger motivation for buybacks lately has been to combat the dilution caused by the zealous granting of stock options. And this motivation often kicks in at exactly the wrong time--not when the shares are at a bargain-basement price but when they're high and rising. (Because that's when top executives and other options holders are apt to cash in.) That is exactly what happened to the likes of Sun Microsystems, which spent $631 million (a third of net income) buying back 12 million shares when its stock was near its peak last year. At the end of May, Sun could have bought those same shares for $433 million less. ..,15935,367415,00.html?

    • A great article (part) on Dilution, Understating Expenses Options-Payroll, Selling Share Cheaply to Insider when they could have been sold to Outside Invstrs, Buy-Backs.
      Part 1-
      The Amazing Stock Option Sleight of Hand
      Justin Fox exposes corporate America's grandest illusion.
      FORTUNE Monday, June 11, 2001 By Justin Fox
      ......Wall Street analysts, journalists--help them do it. By ignoring the numbers that are out there, albeit squirreled away in footnotes, we've become a nation of options-abuse enablers.
      Step one to recovery: Admit that options aren't free. They involve taking something away from the existing shareholders of a company and handing it to the company's employees. This transfer of wealth, or at least potential wealth, may be a good idea. It may pay off for investors in the long run. But the transfer is real nonetheless.
      Giving out options costs a company's shareholders in two ways. The first is by diluting their stake in the company. When employees exercise their options, a company has to issue new shares. This means there are more shares outstanding, which in turn means the stake of existing shareholders in the company is reduced. So when an option is issued, it amounts to a claim on the company-- think of it as someone putting a lien on your house. And the only way to find out about that lien is to look deep in the footnotes of the annual report.
      The other price shareholders pay is the opportunity cost their company incurs by selling shares at a low price to employees instead of selling them at full price to investors.

      If a company were to take all those discounted shares and sell them instead on the open market, it would of course have a lot more cash to spend. And whatever it spent that cash on--machines, consultants, salaries, bonuses--would show up as an expense on the income statement. In economic terms there is no difference between compensating employees by giving them cash and paying them with securities that they can convert into cash. To put it another way: If selling shares to the public and using the proceeds to pay an employee is a cost, then selling those shares to that same employee at a discount (and letting him book the resale profit) is no less a cost.
      Hypothetical sounding or not, the latter cost becomes very real when a company repurchases shares in order to keep options from affecting its reported earnings per share. Remarkably, however, the money spent on share buybacks to counteract options dilution does not have to be reported as an expense.
      We're not talking chump change here. Sanford C. Bernstein, which does the most in-depth options research of any firm on Wall Street, last year analyzed the dilutive effect of every outstanding option at 436 large-cap companies at the end of 1999. Bernstein estimates that, to keep existing shares from being watered down, these companies would have to spend a staggering $53 billion a year buying back their own stock. That figure is equivalent to an amazing 13% of operating earnings--51% for tech companies. Continued

    • If options were expensed, the point is we don't KNOW what the impact on earnings would be.

      FASB has yet to rule on whether options should be expensed (they likely will rule that they should be, beginning with 2004), or more importantly, a way to VALUE options.

      Should options be valued at the time of grant as simply the strike price times the options granted? Should they be valued via Black-Scholes? Should their expense be amortized over the life of the option? Should there be an allowance or addback for the percentage of options that never go exercised (i.e., people departing)? None of these questions have been answered.

      So the answer to the question is -- nobody really knows for sure.

      But since you seem to care so much about this issue, you should be TOUTING USAI as a leader in this field. It is one of the first dozen or so companies to announce that it will fully expense equity compensation beginning with this quarter. Furthermore, they are moving away from stock option grants (where the value is uncertain) and moving toward restricted stock (where the value to expense is certain).

    • jeff you replied again to this post and said-
      My response:
      "1. Travel is a seasonal business, as EXPE explains in their 10Q.
      2. Therefore, it is a good idea to compare year over year trends in revenue and earnings.
      Do so and you'll find that year over year, each quarter is up about 100% from the same quarter prior year.

      And year over year, EXPE's earnings have quintupled.">>>>>

      You stated (for the Dec 2002/2001) "And year over year, EXPE's earnings have quintupled" ($5ml to $20ml). You forgot to comment on what this 400% increase in earning would have been if Expedia had expensed options? And do the small earnings they presented justify a $6 billion valuation?

      Long-Term Sentiment: Strong Sell 04/10/03 06:20 pm
      Msg: 5963 of 5998

      Jeff you HYPED, I mean said-

      �2. PCLN has had HORRIBLE earnings predictability; EXPE has exceeded earnings estimates for seven quarters in a row, and RAISED guidance for this quarter, which suggests eight.�

      The following are the earnings of Expedia for the last 7 Quarters, not too great for a $6+ billion company. And don�t forget Option Expense was not taken. In Msg 5782 I discussed how much Insiders Cashed out of their shares- from post 5782

      <<Richard Barton�s 2002 Option Stock sales totaled over $20ml. Greg Maffei, November 25, 2002, sold 150,000 shares totaling $11 million. These two Insiders Option Sales totaled over $30 million in 2002. If these and other peoples� Options were expensed would EXPE have any profit? Plus Barton and others sold many more million in 2003

      Now if these options were expensed what would the profit be, you stated �EXPE has exceeded earnings estimates for seven quarters in a row� IS THAT A MEANINGFUL STATEMENT? WHO KNOW HOW MUCH IN USAI IS COVERING.

      EXPE�s Quarterly profit (loss)
      12/31/02: $21.4ml...Incr of $1.3ml or 6%
      9/30/02: $20.1 ml..... Incr of $1ml or 5.3%
      6/30/02: $19.1 ml......Incr of $13.4ml or 235%
      3/31/02: $5.7 ......Incr of $ .5ml or 10%
      12/31/01: $5.2..... Incr of profit of $.4ml
      9/30/01: $(4.8)..... decr of loss $ .4ml
      6/30/01: $(4.4)

      Do these profits, that exceeded estimates, justify a $6bn valuation? 1999-2000 is back./////EOM

    • My response:

      1. Travel is a seasonal business, as EXPE explains in their 10Q.

      2. Therefore, it is a good idea to compare year over year trends in revenue and earnings.

      Do so and you'll find that year over year, each quarter is up about 100% from the same quarter prior year.

      And year over year, EXPE's earnings have quintupled.


    • I wrote earlier the market was closed tomorrow. That would be Next friday it appears.

      I confused the masters and easter weekends.

      My bad.

      Will USAI continue to slam the shorts like me? Tough to tell. I'm scared but glad I can watch one more day before the weekend.

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