Making Money From NetZero (Really)

| About: United Online, (UNTD)

You can, but not the way you might think.

The big news at United Online (NASDAQ:UNTD), an Internet conglomerate that last partied hearty in 1999, is how its NetZero unit is partnering with Clearwire on a "free" wireless Internet service of up to 200 megabytes/month. It's basically a rebranded version of an existing Clearwire product, but both companies are hoping that old NetZero brand may still have cachet.

The problem is it's sort of a bait-and-switch. You think, free 4G, but if you try to use it as 4G you'll burn through your "free" bandwidth faster than your cat can say boo. The idea here is that you'll throttle down your own speed, then find you want more bandwidth and actually buy it.

It's just one of so many "let's run this up the flagpole" ideas that United has been known for over the years. Among the companies in its portfolio are FTD, and MyPoints. Each has had its moment in the sun, but most have turned out to be more hype than reality, more hope than profit.

Still, it's hard to see how you can lose a ton of money right now on UNTD, which has been hovering near its 52-week low. The company's strict cost controls let it pay a dividend that yields 8.1%, and the businesses aren't disappearing. The company is legitimate enough to have rung the Nasdaq bell on Monday.

The financials, once you average things out, are fairly decent. It can usually draw one dollar in 10 down to pre-tax income, there's as much in current assets than in quarterly revenue (give or take), and operating cash flow has actually been accelerating modestly for most of the last year.

If you want to compare it to something, however, compare United Online to a newspaper chain, just before the Internet ate the sector up. The assets are being milked for maximum profit. It's not a growth story. It's a dividend stock. Don't buy the hype or the press releases.

But if you like a fat yield, you might consider buying the stock. The net is unlikely to really hit zero any time soon.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.