MIVA, Down Hard On Earnings, May Be An Acquisition Target (MIVA)

| About: MIVA Inc. (MIVA)

If you like going against the crowd, take a look at MIVA, Inc. (MIVA). Shares are down sharply this week due to the latest quarter’s results which were reported after the market closed Monday.

MIVA provides online marketing services in the US and internationally, including offering advertisers qualified leads and facilitating commerce for online merchants. Once upon a time the company was called FindWhat.com (after spending a few years as BeFirst.com).

MIVA reported a GAAP net loss of $4.23 per share for 2005. That’s a pretty severe loss for a company whose shares are trading at around $4. There’s more to the story of course (including always-fun merger accounting) and on an adjusted basis the company reported 2005 earnings of $0.14 per diluted share. That said, the quality of MIVA’s business isn’t what attracted us to the company—MIVA’s potential as an acquisition target is what got our attention.

Revenue for 2005 was reported Monday at $195 million, up 15% over the prior year. This implies a price/sales ratio well below 1x. MIVA isn’t Yahoo, but as a point of comparison, Yahoo is priced at nearly 8x sales. MIVA is also cheap on a price/book basis. According to Reuters, the price/book ratio is 0.94. Yahoo is priced over 5x book value. Perhaps you can find better comps, but we doubt that they will make MIVA look expensive on a price/sales or price/book basis.

The balance sheet held $38.4 million in cash at year end 2005 with little long term debt. Current assets were at $70.3 million, well above current liabilities of $38.9 million and even total liabilities of $44.3 million.

Besides an arguably cheap valuation and a clean, cash-rich balance sheet, there’s also a specific catalyst for a potential acquisition. In January MIVA announced that it retained Deutsche Bank Securities to assist “in exploring and evaluating a range of strategic opportunities . . . . including, but not limited to, the raising of capital through the sale of securities or assets of the Company, a recapitalization, strategic acquisitions, and the combination, sale or merger of the business…