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WedMD Healthy, Shutterfly Should Acquire Blurb

Posted on Thursday, May 7th 2009

Here is a quick look at some of the recently announced results for a few Internet stocks which have done well in the current depressed times.

WebMD (NASDAQ:WBMD), the online health information provider, generated Q1 revenues of $90.3 million, which was growth of 12% over the year. Analysts were expecting revenues of $90.7 million. EPS of $0.05 was significantly higher than previous year’s loss per share of $0.28 and was in line with the Street’s expectations.

By segment, advertising and sponsorship revenue grew 16% to $65.4 million in times when everyone is announcing ad sales declines. Private portal licensing revenue grew 5% to $23.0 million while publishing and other revenue decreased to $1.9 million.

The company decided to sell its Little Blue Book print directory business as it was was not synergistic with the online business. WebMD adjusted its revenue outlook to account for this sale and now projects revenues of $410 million-$440 million with EBITDA of $105 million-$210 million for the year. For Q2, it expects revenues of $97 million-$99 million with EBITDA of nearly 2%.

The swine flu epidemic might be hurting some types of businesses, but it is proving beneficial to WebMD. It was one of the most sought-after companies by the media to provide its view on health issues. The company’s traffic grew 19% to a record average of 61.6 million unique users per month, with total traffic growing 24% to 1.5 billion page views during the quarter. The company also recorded 29% growth in the completed continuing medical education (CME) programs on the WebMD Professional Network.

They remained innovators in the online strategy by launching a new sponsored product called WebMD TV, which is being delivered on WebMD.com. The digital integration platform delivers a TV-like experience to users and integrates multimedia technology with their content and editorial expertise. It is helping large advertisers broadcast patient education and promotional programs on the WebMD site.

The company continued to expand its global reach and during the quarter announced a tie-up with Boots UK, the leading pharmacist in the UK. This is WebMD’s first major consumer initiative overseas, and with it the company will launch a consumer health and wellness portal later this year with Boots. This joint offering should be able to leverage WebMD’s online consumer health assets and Boots’ leadership position in the UK to cater to the largest Internet audiences in Europe.

The stock is trading at $27.78 with a market capitalization marginally shy of $1.6 billion, and it continues to be on the list of my companies bound to grow substantially.

Shutterfly, (NASDAQ:SFLY), the online photo-sharing company, recently reported Q1 revenues of $36.0 million and grew 5% over the year. The company marked its thirty-third consecutive quarter of revenue growth, which is a significant achievement in such a poor economy. However, net loss per share of $0.25 increased from the $0.15 loss per share announced a year ago.

By segment, revenue from Prints fell 12% over the year to $14.0 million while Personalized Products and Services grew 19% over the year to contribute 61% of total revenue share.

This quarter, however, Shutterfly recorded a 1% drop in transacting customers. The transacting customer base fell to 888,000 for the quarter and orders fell 9% to 1.5 million. But the average order value of $24.48 was a significant 15% higher than the previous year.

Shutterfly maintained its commitment towards its personal publishing platform by tying up with social networking and blogging sites such as Facebook, MySpace, Blogger, WordPress and LiveJournal so that users can easily share photo books through these sites.

In a time when the photo-sharing businesses of companies such as Yahoo!, AOL and Sony are packing up while others are expecting users to make purchases to ensure their “memories” were retained on the site, Shutterfly refrained from such activity. Instead it made its site more user-friendly by adding features such as the default print solution for Adobe Photoshop Elements 6 & 7, the Photoshop Album Starter Edition and Photoshop.com, which allows users to easily create quality photo books, cards, calendars and prints.

During the quarter, Shutterfly launched a free mobile application for the iPhone that enables users to upload, view and share their photographs directly onto the Shutterfly site through the iPhone. The iPhone application is ranked in the top 100 of all free applications, and Apple has featured Shutterfly on the homepage of the iTunes Store.

Going forward, Shutterfly expects Q2 revenues of $34-$37 million with a loss per share of $0.41-$0.20. For the year, they are expecting revenues of $195-$215 million with EPS of $0.09-$0.35.

Given that the market is consolidating and players such as Yahoo! don’t seem to want to acquire Shutterfly, it might be time for Shutterfly itself to look towards consolidation. One company I have my eyes on for Shutterfly is Blurb, a photo book self-publisher for professionals and semi-professionals that did $30 million in revenue in 2008. The CEO Eileen Gittins, herself a photographer, has done an excellent job catering to the needs of professionals.

Meanwhile, the stock is trading at $12.62, taking its market capitalization to nearly $318 million.

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