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ValueClick to Divest O&O Segment

Zacks Equity Research

In a bid to focus more on its core business segments, ValueClick (VCLK) recently announced the divestiture of its Owned and Operated Websites (O&O) segment.

The company recently entered into a definitive with InterActiveCorp (IACI) to sell O&O in an all-cash transaction, which is expected to close by Jan 2014.

The Owned & Operated segment includes popular websites like PriceRunner and Investopedia. Following the sale, the owned & operated websites will be integrated into InterActiveCorp’s Search & Applications segment, which already includes popular websites such as Ask.com, About.com and Dictionary.com.

ValueClick’s decision to divest the O&O segment reflects its strategy of focusing entirely on its core Media having revenue of $95.3 million as well as its Affiliate Marketing segments having a revenue of $38.9 million. 

Strength in the Internet advertising industry, increasing e-commerce spending, focus on core business and improving display ad growth trends combined with the divestment of non-core businesses will add to the ValueClick’s growth prospects going forward.  The company’s focus on high-margin businesses is expected to drive future growth.

Moreover, advertising through mobile is expected to fuel e-commerce and online advertising growth. We also remain upbeat on ValueClick’s growing Affiliate Marketing segment.

However, a sluggish macro-economic environment and intense competition from Google Inc. (GOOG), Microsoft Corp. (MSFT) and Yahoo! Inc. (YHOO) are the near-term headwinds.

Moreover, unfavourable foreign exchange and a sluggish European market remain concerns. ValueClick reported mediocre third quarter results, with revenues and earnings below the Zacks Consensus Estimate. We believe that ValueClick’s strong product portfolio, aided by accretive acquisitions, will continue to drive market share, going forward.

Currently, ValueClick holds a Zacks Rank #3 (Hold).

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