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Shedding Flower Business Helps Stock Price Bloom

Posted by Joe Cornell, CFA on Wed, Nov 13, 2013 @ 11:11 AM

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INTERNET: United Online completes FTD spinoff, says ISP cancellations slow.

By Kay Chinn | Staff Reporter | November 11, 2013

Shares of United Online Inc. spiked last week as the company reported improved performance in the third quarter and completed its spinoff of FTD Cos. Inc.

Investors, cheered by greater subscriber retention in United Online's core Internet services business and the focus on that business brought about by the spinoff, drove the Woodland Hills company's stock up to close at $16.78 on Nov. 6, a 49 percent gain for the week. The Surge made it the largest gainer of the LABJ Stock Index.

"Spinoffs have created value," said Joe Cornell, founding principal of Spin-Off Research in Chicago. "A lot of these companies, when they are very diversified, they are hard to value and to manage. You have to allocate capital among different businesses, different capital structures and different needs."

In the tax-free spinoff, shareholders of United got shares of FTD.

The Nov. 1 spinoff of FTD also marked the end of the long tenure of Mark Goldston, United Online's chairman, president and chief executive who is familiar to TV viewers because of his appearances on commercials. He is being replaced by Francis Lobo, who steps in as chief executive and president.

After the markets closed Oct. 30, United Online reported a third-quarter net loss of $47.6 million (-51 cents a share), compared with a net gain of $5.1 million (6 cents) in the same quarter a year earlier. Revenue declined 2 percent, to $175 million.

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The company said the net loss included a $50.2 million write-off of intangible assets due to a material decline in the value of its online yearbook service Classmates.com.

One of United's core products is dial-up Internet service. In a conference call with analysts and investors Neil P. Edwards, the company's executive vice president and chief financial officer, said United Online continued to lose customers but at a slowing rate. The company lost 30,000 subscribers to its ISP business in the third quarter, he said, compared with 66,000 in the second quarter and 133,000 in the year-ago period. It was the seventh consecutive quarter in which the number of lost subscribers declined. The company now has 2.7 million ISP accounts.

"They are not doing as bad as they were," said Cornell, "so people are encouraged by that."

United's NetZero mobile broadband business rose in the third quarter to 44,000 accounts, up from 19,000 in the year-earlier period. That growth is expected to continue next year, when its mobile broadband deal with Sprint goes live in the second quarter.





Spin-Off Research is published by Spin-Off Advisors, LLC. Spin-Off Research is a subscription-based service for Professional and Institutional Investors.  Blog entries are delayed.  Spin-Off Research subscriber-base receive the spinoff report at time of press via Email Bulletins.  To learn more about becoming a subscriber, please contact us. Spin-Off Advisors, LLC provides coverage on all US and major Global spinoffs, carve-outs and split-offs; Spin-Off Research published since March 1997.

Tags: United Online Spin-Off, UNTD Spin-Off, FTD Spin-Off