In discussions with one of my colleagues we were analyzing various strategies that Google (NASDAQ: GOOG) might explore to increase revenue from something other than advertising ... and thought Monster Worldwide (NASDAQ: MNST) was one that we kept coming back too, that might be a good fit. They are the parent company of Monster.com and have a current Market Cap of $5.5 billion at yesterdays closing price of $42.50. So say Google was to fork over $6 billion of its monopoly money in an all-stock deal to get this done. Now they have a real business with real cash-flow and a strong brand that has a big international footprint - a monster footprint!
What are the synergies?
- For one thing both companies have been taking business from newspapers classified & advertising. This would expand Google's grip on that market.
- Google's presence in advertising is instantly worldwide and Monster.com has not stirred the same fear that Google has so they would be able to sneak into some places through the back door.
- The job market in the expanding economies of Asia and eastern Europe are a growth business.
- The integration of the businesses should be relatively easy adding revenue to the bottom line immediately without having to invent anything.
- They both have P/E's in the 40's and some ridiculous metrics but those are very hard to evaluate for stocks with very high beta's - meaning that the share prices fluctuate wildly in comparison to the overall market. But what else shares this situation on the web that fits.
Google needs to show a second source of revenue. For now, even YouTube which looks very promising has added a cost not a gain. They paid $1.6 billion, and more is being spent on litigation issues, marketing, and expanding the brand and negotiating deals. Acquiring Monster.com would be another strong brand in Google's fold. And sometimes you have to make a strategic move like this to keep it away from your competitors and you do not always get to choose the timing.
Does Yahoo (NASDAQ: YHOO) wish they were AOL's search engine? How many companies wish they snapped up MySpace before News Corp (NYSE: NWS.A) did - go get 'em Rupert! Who knows, Rupert Murdock may be circling around Monster.com already. I do not believe Monster Worldwide will be independent this time next year.
If you are interested in long-term value investing read Chasing Value.
Sheldon Liber is the CEO of a small private investment company and the vice president for design and research at an architecture & planning firm. Check out his other posts for BloggingStocks here.
