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DoubleClick Studies Sale, Other Options

November 2004

DoubleClick Studies Sale, Other Options

PHILADELPHIA, Nov 01, 2004 (AP Online via COMTEX) --

The online advertising market is hot, but pioneer DoubleClick Inc. isn't. The provider of Internet advertising services has decided to explore strategic alternatives, including a possible sale. 

Analysts say the reason is in part that DoubleClick has underperformed its peers. A resurgent online ad market has boosted the fortunes of companies such as Yahoo Inc. and Google Inc. But DoubleClick has struggled to capitalize on the boom.

"In an environment where Internet advertising as a whole is growing 35 percent or more, to have a company that plays in that space but is not growing and in fact is declining - that is a relatively negative statement," said analyst Mark Mahaney with American Technology Research.

DoubleClick said late Sunday it hired Lazard Freres & Co. to explore strategic options to boost the company's shareholder value. DoubleClick said options include a sale of all or part of the company, recapitalization, an extraordinary dividend, a share repurchase, or a spinoff.

The news lifted shares of the New York-based company. The stock closed at $7.12, up 76 cents, or 12 percent, on heavy volume on the Nasdaq Stock Market. The stock is down from a year-high of $12.81 hit in April.

Last week, DoubleClick reported higher third-quarter revenue and earnings. Earnings rose to 12 cents a share from the prior year's 4 cents a share, and revenue rose 8 percent to $81 million.

But the results disappointed analysts and investors, partly because revenue growth was relatively tepid. In fact, excluding a recent acquisition, revenue from its online advertising unit declined from a year earlier, Mahaney said.

One culprit has been pricing pressure. Also, DoubleClick has limited exposure to search-based advertising of the kind Google provides, which has been responsible for much of the sector's surge.

DoubleClick shares fell 8 percent Friday in response to the earnings report. The disappointing results followed second-quarter results that missed the company's own forecast.

Now, as the company considers alternatives, it does have some things going for it, analysts said. It has almost $3 a share in cash and other liquid investments, Mahaney said. That would lend itself to a special, one-time dividend to shareholders.

The cash also would be attractive to another company that might want to buy DoubleClick. But it could be difficult to sell the company in one piece. That's because the company has two distinct units: one that provides services to offline advertisers and one that is focused online.

"If you were going to sell, you might sell them separately to two different buyers," Mahaney said. "There may not be one buyer for the whole company."

Ken Marlin, managing partner of boutique investment bank Marlin & Associates, sees several possible buyers for DoubleClick. But one stands out to him: aQuantive Inc., formerly called Avenue A, which competes with DoubleClick in providing advertising technology. Marlin said DoubleClick would be a "great strategic fit" for aQuantive. 

An aQuantive representative declined to comment.

In any case, despite DoubleClick's problems, Marlin said anything related to online advertising is "hot" in the merger-and-acquisition trade right now. Marlin said he isn't advising any of the companies that might be considering a DoubleClick bid.

Copyright 2004 Associated Press, All rights reserved

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