Seeking Alpha
Editor's notes: Buysider Chris Karlin takes the other side of the DXM debate, arguing that the company's rapidly declining legacy business will outpace its digital growth prospects, wiping out the equity value.

Dex Media (DXM) is one of several companies that is attempting to manage a transition from a dying legacy yellow pages business towards a digital local media advertising business. Yellow Media (YLWDF), Solocal Group, Eniro AB (OTC:ENIRF) and Hibu Plc. (OTCPK:YELGF) are in comparable situations. Investors in the equity of any of these situations are making the following assumptions:

  • The rapidly decreasing cash flow from the print business will last long enough to pay off the debt of the enterprise.
  • The resulting local business can grow into a standalone business.

It is unclear whether either assumption will prove to be valid in the case of Dex Media.

The legacy print business was an excellent...

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