A year after completing a big merger, Web.com Group Inc. said its third-quarter results show that merger was a success. The company thinks it can replicate that success with an even bigger merger.
Jacksonville-based Web.com last week reported third-quarter adjusted earnings of 29 cents a share, up from 20 cents in the third quarter last year when it closed its deal with competitor Register.com. The merger of the two companies that provide Internet site development services for businesses was projected to grow Web.com’s annual revenue from about $100 million to $180 million.
But the Register.com deal was nothing compared with the acquisition of Network Solutions last month, which is projected to raise Web.com’s annual revenue to $450 million.
“What is most exciting to us is Web.com’s future,” CEO David Brown said Thursday during a conference call to discuss third-quarter results.
Web.com has increased revenue in each of the past four quarters since buying Register.com and also improved earnings, and Brown said investors should take notice of that in light of the Network Solutions deal.
“The steady improvement of our financial results following the acquisition of Register.com is evidence that the company’s acquisition strategy is both sound and paying immediate dividends,” he said.
Network Solutions is best known for its business of registering Internet domain names and, like Web.com, it also provides Internet services to small and medium-sized businesses. Brown said the merger will make Web.com a dominant company in the market.
Once the operations of the two companies are integrated, Web.com expects to grow annual revenue by a percentage in the low teens in the next three or four years, he said, with earnings growth from the mid-teens to 20 percent.
Brown said $500 million in annual revenue is “within our sights and our longer-term goal is to scale our company to the billion dollar revenue level.”
“This is truly a game-changer for our company,” he said.
St. Joe saga continues
The St. Joe Co. moved its headquarters from Jacksonville to the Florida Panhandle last year, but it continues to be an interesting company to watch.
The latest chapter in the St. Joe saga involves the resignation of one of the two people who organized a takeover of its board of directors last winter.
Charles Fernandez, who was named vice chairman of St. Joe in March, resigned from the board of directors Oct. 17 for “personal reasons,” according to a Securities and Exchange Commission filing by St. Joe. On the same day, he resigned as an officer and director of Fairholme Funds Inc., according to a Fairholme SEC filing.
Fernandez was the No. 2 executive at Fairholme, the investment firm that controls 29 percent of St. Joe’s stock. Fernandez and Fairholme’s top executive, Bruce Berkowitz, started a proxy fight with St. Joe’s management last winter that resulted in the ouster of St. Joe’s management team and put Berkowitz and Fernandez on the board. Berkowitz remains chairman of St. Joe.
At the time of the proxy fight, many investors probably gave Berkowitz the benefit of the doubt that he knew what he was doing. His Fairholme Fund has been enormously successful and he was named domestic fund manager of the decade by Morningstar Inc. in 2009.
But this year has been a different story. Fairholme’s mutual fund shares have dropped by about 24 percent so far this year and some people wondered if Berkowitz was spending too much time focused on topics like St. Joe, rather than the overall performance of the fund. Now some people are questioning Fernandez’s role in the fund.
A recent story in Barron’s financial newspaper said that when Fernandez was “abruptly” named president of Fairholme in 2008, “Fairholme’s longtime team of portfolio professionals were effectively displaced by the now 49-year-old Fernandez, who had no apparent experience in investment management.” So now the question is, was Fernandez’s resignation related to the fund’s poor performance this year?
And what’s going on now at St. Joe? It’s hard to say. The company last week reported a third-quarter loss of $2.4 million, continuing a string of losses over the past four years as the real estate market collapse halted St. Joe’s development activities.
The company did not schedule a conference call to discuss its quarterly results. In its news release, CEO Park Brady said the company expects to unveil a new strategic plan by its annual meeting in 2012.
We’ll be waiting.
FIS reports higher earnings
Fidelity National Information Services Inc., or FIS, reported third-quarter adjusted earnings of 62 cents a share, 10 cents higher than last year’s third quarter and a penny above the average forecast of analysts surveyed by Thomson Financial. The Jacksonville-based company, which provides technology services for financial institutions, said revenue from continuing operations rose 4 percent to $1.43 billion.
“Looking back on the first nine months of the year, the team has driven solid organic revenue growth and managed the business very well in a difficult economic environment,” CEO Frank Martire said in a conference call with analysts last week.
D.A. Davidson analyst John Kraft reiterated his “buy” rating on FIS after the earnings report.
“FIS appears to be gaining market share and we are seeing clear evidence that financial institutions are increasingly choosing to outsource their technology. FIS’s shares have materially underperformed their peers (perhaps over European concerns) and now carry the lowest valuation. We expect that trend to reverse over the coming quarter,” Kraft said in his research note.
But in an overall down day in the market, FIS’s stock fell $1.38 to $24.80 Tuesday after the earnings report.
Robert W. Baird analyst David Koning maintained his “outperform” rating on FIS, but said the third-quarter report did give some investors uncertainty about future results.
“Third-quarter results were mixed, but were about in line with lowered expectations. More importantly, management provided some vague commentary on 2012 revenue and EBITDA expectations which will likely raise some concerns over long-term EBITDA growth in the core business and lower 2012 Street estimates fairly significantly,” Koning said in his report.
ParkerVision again in danger of losing listing
ParkerVision Inc. is once again in danger of losing its Nasdaq listing because of its low stock price.
The Jacksonville-based company, which is developing wireless radio technology, said Friday that it was notified by Nasdaq that it could be delisted because its closing stock price has been below $1 for 30 consecutive business days.
ParkerVision had been in a similar situation earlier this year but it regained compliance with Nasdaq requirements in August because its stock traded above $1 for 10 straight business days.
The company can regain compliance again if the stock closes above $1 for 10 straight days sometime in the next six months.
Stein Mart sales up slightly in October
Stein Mart Inc. last week reported that comparable store sales rose in October, the first monthly gain since May. But the higher sales did come at a cost.
The Jacksonville-based fashion retailer said disappointing sales results in August led to higher clearance levels, which impacted profit margins for the third quarter ended Oct. 29.
Stein Mart said total sales for the four weeks ended Oct. 29 rose 0.2 percent to $85.7 million and comparable store sales rose 0.1 percent. But overall sales for the third quarter fell 3.5 percent to $258.5 million and comparable store sales fell 2.9 percent.
Final financial results for the quarter will be announced on Nov. 17.