Monster Worldwide: Buyout or Bust?

by Tom Taulli | April 4, 2013 1:59 pm

Once a tech innovator, Monster Worldwide (NYSE:MWW[1]) now looks like a artifact of another age.  Back in 2007, the stock was over $45 but has since plunged to a lowly $4.56.

It’s a classic case of a company failing to innovate, missing megatrends like social media and mobile.  Other players like LinkedIn (NYSE:LNKD[2]) have instead taken much of these growth markets.  Oh, and Facebook (NASDAQ:FB[3]) is looking to enter the fray as well.

It’s grim. But is there still hope for Monster?

Well, the valuation is certainly attractive.  Consider that the enterprise-value-to-EBITDA ratio is a mere 4x.  This compares to Google’s (NASDAQ:GOOG[4]) 14x and LinkedIn’s 147x!

What’s more, Monster has an assortment of interesting assets.  For example, the company claims a customer base of over 300,000, which includes 95% of the Fortune 500, and its websites attract about 21 million monthly unique visitors.  In terms of technology, Monster has been focused on cloud platforms, semantic search and analytics.

Yet the company continues to feel the pain from the sluggish job markets, especially in the U.S. and Europe.  Unfortunately, it looks like any improvement will be gradual.

To deal with this dour situation, Monster has taken significant actions to restructure its operations.  The company has unloaded its businesses in China, Latin America and Turkey.  Management has also slashed the headcount.  As a result, Monster forecasts annual savings of $130 million.

While such moves will help — at least in the short run — they  may inflict further harm to the brand.  After all, there will be fewer resources for new products and marketing campaigns.  Already Monster’s brand is outdated.  But it seems that its uncool image will only get worse.  A new crop of startups including Proven are getting lots of traction because of their innovative approaches.  Often this means leveraging mobile platforms from Apple’s (NASDAQ:AAPL[5]) iOS or Google’s Android operating system.  Hey, this is where people look for jobs now.

Buy or Sell?

Interestingly enough, last year the company announced it was exploring “strategic alternatives” — that is, it was looking to sell the company. But there was little interest.  In fact, on the latest conference call, Monster’s CEO indicated that a sale of the company was not a priority.

So while the company may be cheap and could get a lift if the jobs market improves, the prospects still look scary.  The company is essentially stuck in another era as competitors aggressively take away its business.

In other words, the deterioration in the stock may be far from over.

Tom Taulli runs the InvestorPlace blog IPO Playbook[6]. He is also the author of “How to Create the Next Facebook[7]” and “High-Profit IPO Strategies: Finding Breakout IPOs for Investors and Traders[8].”Follow him on Twitter at @ttaulli[9]. As of this writing, he did not hold a position in any of the aforementioned securities.

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