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Barron's notes that of the two major dial-up ISPs still doing business -- EarthLink (NASDAQ:ELNK) and United Online (NASDAQ:UNTD) -- the latter has managed to diversify into successful new revenue streams ( and online loyalty marketer MyPoints), while the former has not.

Now United CEO Mark Goldston is making his most creative move yet: a recent announcement to acquire global florist network FTD (FTD-OLD). FTD will cost United about $800M.

Goldston contends his acquisition strategy is thematic: Both FTD customers and subscribers are 65% women, largely over 35, and make north of $50K a year. How's that for targeted marketing? Between its dial-up business and its websites, United boasts a client base of 50M+ to whom it can cross sell.

The dial-up business -- a veritable cash cow -- isn't exactly growing by leaps and bounds, but nor is it shrivelling up. Operating margin last quarter was a robust 38%, and Goldston contends the churn rate is dropping.

United currently yields 7.2% (which will be halved to help finance FTD). It has repurchased $150M in shares over the past three years. It trades for under 10x 2008 revenues. At some point, Goldston will manage to pull off his aborted attempt to IPO 20% of Classmates. Barron's says shares are cheap.


  • Larry Dignan fails to find any synergy in the FTD deal.
  • On United's most recent conference call, Goldston says it's unlikely the company would pursue AOL's premium dial-up business. "The AOL business is an intriguing business, because it's a strong brand name as you know. That's the plus. The minus is they are a business that has predominately been in the premium segment of dialup, which is on the road to becoming an oxymoron, and so there are challenges there."

Source: United Online's Future Looks Rosy - Barron's