Will Salesgenie.com Make infoUSA's Dreams Come True?

The genie is out of the bottle and infoUSA Inc. (Nasdaq: IUSA) is determined to make sure the spirits are allowed to continue to roam free.

With the slogan “unlimited sales leads,” the Salesgenie.com data service is just one high-profile example of how infoUSA is commoditizing its 30-plus years of data collection—this being an effort that targets smaller businesses and entrepreneurs seeking sales leads.

Founded with a $100 investment in 1972 by the chairman and chief executive officer, Vin Gupta, infoUSA compiles several proprietary databases that contain information on most businesses and households in the United States and Canada. Most of the work is handled out of its headquarters in Papillion, Neb., with some operations in India.

About two-thirds of the information in the infoUSA databases is updated annually. There are more than four million clients using infoUSA data, which includes 210 million consumers, 75 million homeowners, 11.4 million executives—and in this age of crumbling mortgage markets and a sluggish economy, 8.5 million bankruptcies.

In late 2006, infoUSA completed the acquisition of Opinion Research, a research and consulting firm that for nearly 80 years has provided survey research services to the private and public sector. Another infoUSA subsidiary is Yesmail, an e-mail marketing company that gives companies the resources to dish up permission-based online solicitations. It’s also eyeing the potential of the United Kingdom and Australia.

For the large Fortune 1000-type clients, infoUSA distributes its data bases and services through the Donnelley Group, a marketing firm with 90-year-old roots based on phone books, acquired in 1999.

Last week, infoUSA reported a 53% increase in profit and 74% revenue growth for the quarter ended Sept. 30. The company posted earnings of $17 million, or $0.31 a share, up from the $11.1 million, or $0.20 a share, in the same quarter in 2006. Revenue grew to $185 million from $106.4 million. However, the most recent results included an $11.2 million settlement of a five-year-old legal dispute over a contract breach, which boosted the bottom line by more than $9 million.

Analysts surveyed by Thomson Financial were expecting $0.14 earnings per share and revenue of $168 million.

During a Friday conference call with analysts, CEO Gupta and Stormy Dean, the chief financial officer, did point to infoUSA’s plans for Salesgenie.com, which targets smaller businesses and entrepreneurs. Subscriptions generally cost $90 to 180 per month for data access. The company’s commercials have included the little girl talking about her hard-working dad who doesn’t have to work so hard, thanks to Salesgenie’s leads—and her reward being more time with dad and puppies.

“Salesgenie is our engine for future growth,” Gupta said. “We have built a great brand name and plan to use it so that Salesgenie becomes a true destination site for salespeople.”

Ahead of the third-quarter announcement, one report offered a favorable opinion about infoUSA’s shares. On Sept. 6, infoUSA was raised to buy from hold by analyst Daniel Scalzi at Matrix USA, which weighs stocks on their economic value-added potential. The report outlined how the share price was possibly undervalued when compared with the Russell 3000 index.

Analyst Kevin Starke of Weeden & Co. was pleased to see the results, and maintained a buy rating on infoUSA, with a $15 target price. He sees plenty of room for infoUSA’s stock to rise.

However, Starke wrote in a note to investors on Monday that he is hoping to see better consistency in earnings performance out of infoUSA, since the company has posted some up-and-down quarterly results.

“We are impressed with IUSA’s 3Q07 performance, but we remain mindful that the company has lately had difficulty delivering back-to-back earnings successes,” he wrote. “With the stock trading at 7.1x EBITDA, versus a more normal 12x for the group, and with some insulation from recession provided by the Opinion Research acquisition in late 2006, we continue to believe the shares have a good support level around $9-10, and are still dramatically undervalued.”

While the infoUSA share price is again approaching the 52-week high seen last November of $12.70, it’s not that far off the lows hit last March 29, of $9.01. Still, there are some gray areas that potential investors must consider. Shares of infoUSA closed at $10.35 on Tuesday.

In recent months, infoUSA has made headlines for reasons outside of the realm of corporate activities, with a political spin. Founder Gupta has friends in high Democratic places—former President Bill Clinton and the current presidential hopeful, Hillary Clinton.

Shareholders Dolphin Limited Partnership-I and Dolphin Financial Partners have sued Gupta and the company, alleging improprieties that included the use of infoUSA corporate jets. The jets were allegedly used by the former president and Hillary Clinton for business, personal and campaign trips. Bill Clinton has a five-year, $3 million consulting contract with infoUSA, the Dolphin suit said.

In a June press release, Dolphin—which has held a 3.6% stake—again questioned some of the company’s actions, including what it said were poor returns to investors, the missing of guidance and limited analyst coverage.

Shares of infoUSA did tumble 14% in the session following Feb. 1 guidance calling for 2007 earnings per share of $0.68 to $0.75, which the Dolphin release said was below a consensus estimate of $0.91. But the company questioned the source of that guidance.

A spokesman for Hillary Clinton’s presidential campaign told The Associated Press in May that election and Senate ethics rules were followed. Dolphin has tried to place its directors’ candidates on the infoUSA board in the past, but failed.

For the final three months of the year, the Thomson Financial analysts’ estimates call for infoUSA to report a modest increase in earnings per share, to $0.21 from $0.20 from the 2006 quarter. The estimates see a 40% revenue increase, to $176 million. The full-year tally on earnings per share is expecting a drop to $0.56 from the $0.60 reported last year, but a 53% surge in revenue to $667 million. The median target price calculated by Thomson is $14.

Data is only as good as the source and how it’s put to use. With its Salesgenie.com services, infoUSA is tapping into the potential of smaller businesses, which could give its earnings a continued boost in the coming quarters

Disclosure: none

Comments

[Sarathi:]

Try GoLeads.com its much cheaper and More qualified then Salesgine.com

2008 Sep 15 01:04 PM