United Online (Nasdaq:UNTD) is a remarkably consistent business. In each quarter in 2005, the company had approximately $105 million in revenue. Gross profit each quarter was around $104 million. Operating income each quarter was about $21 million.
United Online was put together from the body parts of internet access providers Juno and Net Zero in 2001. In 2004, the company bought Classmates Online. I am not sure how that part fits even after going through the 10-K. The core of the company's business is its five million paid accounts.
The company offers its customer tiers of service, most between $9.95 and $14.95. The customers get internet access, e-mail, and additional goodies like free voice over IP. The company also has a photosharing business, but there are so many good ones offering free service that it is hard to understand why anyone would use this.
United Online is a very small business in a market with giant competitors. This would include the likes of Verizon (NYSE:VZ), Qwest (NYSE:Q), Comcast (NASD:CMCSA), and AT&T (NYSE:T), to name a few. In other words, any phone company or cable provider in the country, not to mention WiFi providers. United Online navigates this competitive landscape by offering dial-up service while most of the competition is broadband.
The company has $244 million in cash and short term investments, up about 5% from 2004, so there is no concern here that the business cannot provide for itself.
This is not a standalone business. Period. At $12.65, the company is in the middle of a narrow trading range and has a market capitalization of $800 million. But, someone should tell the board to hire an investment bank.
UNTD 1-yr Chart
Douglas A. McIntyre is the former Editor-in-Chief and Publisher of Financial World Magazine. He was the president of Switchboard.com when it was the 10th most visited site in the world, according to MediaMetrix. He has been chief executive of FutureSource, LLC and On2 Technologies, Inc. and has served on the boards of TheStreet.com and Edgar Online. He does not own securities in the companies he writes about.