Yellow Pages Companies: Sinking into Oblivion

For a vivid reminder of the way the Internet - combined with a vicious recession - can destroy a well-established industry, consider today’s news from the collapsing Yellow Pages business.

Idearc (IDAR.PK), a 2006 spinoff from Verizon (VZ), late yesterday warned investors that it is considering various ways to restructure its mountainous debt; among the options its mulling are a pre-packaged bankruptcy filing; the company said if it can’t negotiate a pre-packaged deal with creditors, it might filed for bankruptcy protection anyway.

CEO Scott Klein said in a statement said the directory publisher is “making progress on our transformational and cost-cutting initiatives,” but that “the unprecedented economic challenges this nation is facing are creating never-before-seen obstacles for our clients and, as a result, for us as well.”

Also yesterday, R.H. Donnelley (RHDC.PK), another yellow pages publisher, said it has hired Lazard as a financial advisor to evaluate ways to revamp its capital structure. CFO Steven Blondy said in a statement that the company has “significant debt maturities” coming up in 2010, and that it might not be possible refinance them given the state of the capital markets. The company said it will start talks with its banks and bondholders about “amending, refinancing or restructuring our debt obligations.”

In trading on the pink sheets, Donnelley shares are down a penny, or 10%, at 9 cents while Idearc is down 4 cents, or 43.8%, to 5 cents.

Comments

[BigOlDave:]

Meaning ...? Don't buy Idearc or R.H. Donnelley, right? Give readers a conclusion, not just facts.

Dave

Mar 14 10:13 AM

[Joe Public:]

Draw your own conclusions, Dave. Do you want to mess with stocks trading at 9 cents and 4 cents? It's a total gamble. You could hit it big or go to zero, likely the latter. I don't think there's any in between. Unless you are intimately familiar with either companies' situation, how can you make an intelligent evaluation? Besides, Savitz isn't a securities analyst. He's mostly a reporter.

Mar 14 06:10 PM

[User 411726:]

This outcome is completely expected when you look closely at what Donnelly, Idearc and other Yellow Pages companies really are - simply a distibutor of "canned data", which today is available for free on every mom/pop website and local directory. Data, which used to be the "gold" of the phone companies and routinely returned high margin profits, was guarded by those same phone companies - they were the only ones who had it initially, as a result of businesses signing up for phone service. Today, the Internet as destroyed their edge, as data has become another commodity either freely given away, or sold for pennies. Donnelly paid $350 million for Business.com in 2007. Today Donnelly as an ENTIRE COMPANY is worth a fraction of that. Expect them and many of their competitors to disappear by 2010.

May 11 11:34 AM