This, the first of our regional blogs, is authored by the technology and financial journalist Dominic Basulto. Dominic is a New York native, has been a senior editor at Corante since day one and has written for a number of online and offline media companies. Send tips or story ideas to: basulto@gmail.com.
About this weblog
Here we'll report daily on the latest tech and business developments in New York City. Impossible we concede: comprehensive coverage of the city's every story. What we hope you'll find: tips, tidbits and perspectives you won't find elsewhere. As well as unique insights, original interviews and more that should be of interest to New York's vibrant community of technologists and those who track, invest in and report on them.
The Dolans have officially taken their $7.9 billion Cablevision buyout offer off the table. Newsday has the details: "In the latest twist in a year of dramatic turns for Cablevision Systems and the family that controls it, the Dolans said they had withdrawn a $7.9-billion offer to take the cable company private and to spin off its New York Knicks and Rangers, TV channels and Madison Square Garden." In their offer, the Dolans valued the company at $33.50 a share. On news of the withdrawn offer, however, Cablevision's stock price fell by $3.54, to $26.24.
Instead, the Dolans recommended to the board that shareholders receive a special one-time dividend of $3 billion, or roughly $10 a share. Since the Dolan family owns a 22% stake in the company, that translates into a $700 million payday for the dysfunctional Dolans.
While investors roundly criticized the decision by the Dolan family, some Wall Street analysts actually upgraded the company's stock on the news. For example, Banc of America Securities changed its rating on Cablevision from "neutral" to "buy" and upped its target price to $33, while Stifel Nicolaus changed its rating from "market perform" to "market outperform" with a new price target of $35. The conclusion, apparently, is that the Dolans were actually offering fair value ($33.50 a share) for Cablevision.
As Barbara Hoffman of the New York Post explains in today's NYP@Work section, "firing isn't easy for anyone - even when you do it once a week, on reality television." Like Donald Trump, for instance. With a big, half-page photo of The Donald as a backdrop for the article, Barbara Hoffman provides some tips and advice for anyone in the uncomfortable position of having to fire someone. The first step, says Hoffman, is to "document, document, document." Or, as we like to refer to it, CYA. Oh, and as an added bonus, a work/life consultant explains in an accompanying sidebar why "only wimps fire people on Friday afternoons."
Interesting item in Wednesday's Wall Street Journal: Martha Stewart has launched a plan to create Martha Stewart McMansions around the country. Apparently, Martha Stewart has entered into a deal with KB Home (one of the nation's largest home builders) to make near-replicas of her various homes - including the infamous home in Bedford, New York where she spent time after her prison sentence. It's all part of a broader plan to boost revenue for her media company, Martha Stewart Living Omnimedia, which will share in the revenues of the deal based on a pre-existing formula.
"Martha isn’t content with your kitchen or your bedroom anymore, she wants to be in your whole house. It has been announced that America’s neatest jailbird will design new homes in an agreement with builder KB Home. The first group of Martha branded homes will go on sale in Cary, North Carolina and will be known as the “KB Home Twin Lakes: Homes Created with Martha Stewart.” Additional Martha domiciles will be coming to Houston and Atlanta. The North Carolina houses will be inspired by Martha’s manses in New York and Maine. She will select the flooring, faucets, cabinets and other fixtures for the buyers to choose from. Prices will range from the low-$200,000s and the mid-$400,000s for 1,500 to 4,100 square feet of space."
The New York Post has the inside scoop on a rumored deal involving Time Warner and Microsoft:
"In a deal that would unite two of America's corporate giants as partners in the Internet business, Time Warner is in advanced discussions to sell a stake in America Online to Microsoft... According to two sources familiar with the matter, Time Warner is in talks with Microsoft about selling the stake in AOL and then combining it with Microsoft's Web unit MSN."
Anonymous sources also report that Time Warner is shopping AOL to Yahoo! and Google at the same time, so the odds are high that Time Warner is close to washing its hands of the Internet unit. Could this be the result of pressure from Carl Icahn and his barbarian hordes? In addition to pushing for a seat on Time Warner's board, Icahn has been making noise about spinning off or selling outright various units of the media/Internet giant.
The New York Post reports that Carl Icahn is "tightening his famous raider's grip on Time Warner chief Dick Parsons in hopes of quicker profits on the media giant's anemic shares." Icahn is currently angling for one or more seats on the company's board of directors, and to do so, he's "pulled together a posse of other investors." Since Parsons took over the helm of the company in May 2002, Time Warner shares have actually fallen 4%.
Rumors are leaking out that billionaire corporate raider Carl Icahn is weighing a possible tender offer for a 10% equity stake in media giant Time Warner. Representatives for Carl Icahn and Time Warner both refused to comment, so at the moment, it's only speculation. However, where there's smoke, there's fire.
Currently, Icahn's investor bloc controls about 2.6% of Time Warner, so edging that equity stake up to 10% will require about $8 billion. No small feat, even for Icahn. In fact, Wall Street insiders are skeptical in general about Icahn's plans:
"This is a very, very difficult situation for Icahn to win beyond what he's done already. This is a very large float -- 4.6 billion shares outstanding. Even with 10% of the shares, it's hard to see that he would be able to meaningfully change the direction of the company... This is not the typical Icahn deal, where there's a sleepy management and no one realizes the value of the assets. Time Warner is the most overanalyzed collection of assets on Wall Street..."
The New York Post reports that Microsoft is sniffing around Times Square for a new retail store location:
"Microsoft is on the prowl for a store in Times Square. The move would be the software giant's first big stab at retail and may be an attempt to play catch-up with archrival Apple, which has hit a home run with its own branded stores, including its New York City flagship in SoHo. Microsoft is looking for a large space to create a "branding experience" a la Apple's showroom and information center."
The most likely venue for a new Microsoft store, say analysts, is One Times Square -- the building where the New Year's Eve ball drops each year.
Long Island-based OSI Pharmaceuticals will acquire Eyetech Pharmaceuticals, which has offices in Times Square, for approximately $935 million in stock and cash. OSI Pharmaceuticals specializes in cancer treatments while Eyetech makes the age-related macular degeneration treatment Macugen. According to the terms of the deal, OSI will pay $20 per share for Eyetech, a 43% premium to the stock's closing price of $13.99 on Friday.
What do you do when you feel especially loyal to an institution that has nurtured you for over 40 years? One answer: give a gift of $105 million. The New York Times has the fascinating back story on how Jan Vileck, a Czech immigrant who came to the U.S. with only two suitcases "full of useless stuff," became an eminent researcher in New York and wound up making one of the largest gifts ever to a school or health care institution in New York City:
"A scientist who hid from the Nazis as a child, escaped a Communist regime, did pioneering medical research and made a fortune on a blockbuster drug will give $105 million to the New York University School of Medicine, his professional home for four decades... The donation by the scientist, Jan T. Vilcek, 72, is one of the four or five largest ever given to a school or health care institution in New York City, and among the biggest in the nation."
Cablevision has already lined up two blue-chip Wall Street investment banks - Morgan Stanley and Lehman Brothers - to advise on a buyout offer from the Dolan family. In addition, Cablevision's board has formed a special committee to evaluate the offer. In June, the Dolan family offered to take Cablevision private in a $7.9 billion cash-and-stock deal that would lead to the company splitting off its TV networks and sports teams into a separate entity (Rainbow Media Holdings).
Whatever happens at Cablevision is worth watching, especially the continuing twists and turns in the family-son drama between Charles and James Dolan. Is it possible that the Dolan family will really live happily ever after?
Planning on booking a last-minute weekend getaway with Delta? Not so fast, says Newsday. Delta Air Lines yesterday raised some ticket prices by as much as $100, citing "spiraling fuel costs that threaten to push the carrier toward bankruptcy." Bad news travels fast in the airline industry, since three other major carriers - Continental Airlines, United Airlines and USAirways - also decided that, hey, fuel costs are kinda high, now that you mention it. Without giving it a second thought, these airlines also matched Delta's fare increase "almost immediately."
One airline consultant on Long Island expressed surprise at the size of the fare hike: "I was surprised by the $100. I would have guessed a $20 change..." Considering that the price of oil has spiked by about $20 in the past six months, we kinda like that $20 figure too.
Consolidation in the online brokerage industry continues: Ameritrade announced plans to acquire TD Waterhouse for nearly $3 billion after shaking off an earlier acquisition offer from E-Trade. The combined entity, to be known as TD Ameritrade, will become the largest online broker with 239,000 average daily client trades; annual revenue of more than $1.8 billion and about 5.9 million total accounts.
Forbes has more on the musical chairs in the online brokerage industry, which left E-Trade standing as the only one without an online brokerage partner. Forbes hints, though, that the bulked up TD Ameritrade may make a run for E-Trade sometime in the future, creating a mega-supersized online broker.
Long Island-based Computer Associates is paying $350 million to acquire a West Coast software company called Niku. That's not a typo -- it's Niku, not Nike. It's the company's fourth acquisition of note in the past 12 months.
By the way -- when will the writers at the New York Times stop referring to Computer Associates as "scandal-scarred"? It must drive the executives at Computer Associates nuts -- they're spending almost half a billion dollars for a new software company, and all anyone wants to talk about is accounting improprieties that happened a few years ago.
Barry Diller's IAC/InterActiveCorp will sell its 5.4% stake in TV, movie and theme-park business Vivendi Universal Entertainment to NBC Universal for $3.4 billion. As the New York Daily News points out, the move is a direct result of Diller focusing his energies on Internet retailing and e-commerce. Once a film and TV mogul, Diller is now putting all of his eggs in the Internet (oops, "interactive") basket.
In addition, the transaction settles the vexing matter of tax litigation between IAC and Vivendi, furthering opening the door for Diller to close on the Ask Jeeves deal and spin off one or more of his online travel businesses. For now, Diller has not indicated how he plans to spend the $3.4 billion windfall, other than to point out that "IAC doesn't have 'big eyes' for another acquisition."
According to the print version of The Wall Street Journal, toy maker Lego Holding will sell its Legoland theme park business to New York-based private equity firm Blackstone Group for a cool $468 million. The Lego Group, though, is denying these rumors that a sale has already been made: "Our negotiations continue to be with several interested potential investors, and we can therefore deny media speculation that a deal has been reached."
Crain's New York reports that About.com has signed a two-year deal with comparison shopping site Kayak.com to offer readers online travel information:
"In a first-of-its-kind deal for Manhattan-based About.com, an online consumer information network that was bought in March by the New York Times, Kayak.com will serve as its 'premier booking partner.' Visitors to About’s travel pages will find a box where they can enter basic information on a planned trip; they will then be connected to Kayak’s site. Links to Kayak will also be embedded in articles about destinations."
Long Island-based Allion Healthcare priced its IPO yesterday. The company plans to sell 4 million shares at an estimated price range of $12 to $14 per share, for a total of up to $56 million. The lead underwriter for the deal will be Thomas Weisel Partners. Allion provides specialty pharmacy and disease management services to patients with HIV and AIDS.
Ameritrade may claim that it's not for sale, but that didn't stop rival online broker E*Trade from disclosing an offer that it recently made for the company. A deal between E*Trade and Ameritrade would be a blockbuster, creating a combined company that would have more than 7 million customers generating about 300,000 trades a day and boast total client assets of approximately $170 billion.
According to TheStreet.com, E*Trade's proposal included terms that would give Ameritrade shareholders 47.5% of the combined company, plus about $1.5 billion in cash. Terms of the deal also included joint participation in senior management roles and representation on the board of the combined company.
"Dennis Crowley and Alex Rainert were students of mine at ITP. I’ve watched them build Dodgeball over the last few years, which was both inspiring and instructional. Given the level of thought and effort they’ve put into it, this is really good news, for them and for Google."
The acquisition is an interesting one for Google, Shirky notes, since it means that the company could be attempting to reconcile two completely different views of the world: an information-centric view and a social-centric view.
Crain's New York reports that Colorado-based EchoStar Communications will take over the 21 high-definition satellite television channels that are part of Cablevision's money-losing Voom service. EchoStar will start carrying 10 of the channels this year, and then expand to the full 21 sometime in 2006. On news of the deal, Voom also announced that it is shutting down for business after a long, painful death.*
*barring another last-minute intervention by Charles Dolan, of course
Primedia is in talks with investment bankers at Credit Suisse First Boston to sell its Primedia Business Information unit. The unit, which consists of 70 B2B publications, 100+ Web sites and 25 special events, was responsible for about 15-20% of the company's overall revenue last year ($224.8 million of a total $1.3 billion). The move comes amid efforts by the company to slim down and re-focus its energies: in February, for example, Primedia sold off its About.com unit to the New York Times for $410 million.
From the Dow Jones Newswires: New York-based Internet advertising firm DoubleClick has signed a deal to be acquired for $1.1 billion by a West Coast private equity firm. Details are to be released at a 10:00 am conference call, but initial reports suggest that CEO Kevin Ryan could be departing the company once the deal is finalized. The deal values DoubleClick at $8.50 a share. Before rumors of the deal surfaced, shares of the company were trading around the $7.50 mark.
Cablevision's last-minute $17.1 billion all-cash bid for Adelphia was not enough, according to Bloomberg News. Comcast and Time Warner agreed to buy the bankrupt cable company for $17.6 billion in cash and stock: $12.7 billion in cash and $4.9 billion worth of shares in a cable company Time Warner plans to spin off. According to Bloomberg, the deal will "reinforce Comcast and Time Warner Cable's dominance in the industry."
"DoubleClick, the one-time darling of dot-com advertising, is nearing an agreement to be sold to Hellman & Friedman in a potential deal that could be worth around $1.2 billion."
Single click, $600 million. Double click, $1.2 billion.
Looks like Cablevision hasn't given up on its acquisition bid for Adelphia: Newsday reports that Cablevision has upped its offer to $17.1 billion in an attempt to outbid Time Warner and Comcast. The company's earlier all-cash offer was for $16.5 billion. So... the question for Adelphia (and its creditors) is whether the $18 billion cash-and-stock offer from Time Warner and Comcast is superior to the $17.1 billion all-cash bid from Cablevision.
Actually, it's not quite as easy as that. There's also the matter of the breakup fee:
"Adelphia has agreed that if it switches to a bidder other than Time Warner and Comcast, it will pay them a breakup fee of 2.5% of the sale price, equal to nearly $450 million at current bidding levels."
New York-based private equity firm Baker Capital has acquired full control of MusicNet, the digital-music service formed in early 2001 by RealNetworks and a consortium of big music labels like EMI and Sony. While the change in control will not result in a "radical change for the company," according to CNET, the deal does highlight "the big music labels' retreat from selling music directly on the Net, in favor of letting brands such as Apple Computer, Microsoft and Napster serve as online song stores."
Paid Content follows up on the Baker Capital - MusicNet deal, speculating that the price tag could have been as high as $50 million. After speaking with industry insiders and sources close to the story, Rafat Ali comments on what the deal means for MusicNet:
"This move is probably best for the survival of the company, as the ownership structure was very complicated. With multiple labels involved, and with RealNetworks owning about 25 percent of the company, any innovation meant getting all the owners involved, a nightmare to say the least (and RNWK's own efforts at parallel with MusicNet)."
Newsday says tomorrow is "D-Day for the Dolans," with two major decisions expected that will have significant impact on the future of the Dolan family and the Cablevision empire:
"In one decision Thursday, the Metropolitan Transportation Authority is to announce whether Cablevision, the Jets or longshot energy concern TransGas will get to develop a 13-acre site on the West Side of Manhattan. Thursday also is the day an agreement expires between Charles Dolan, 78, and the board of directors to keep alive the Voom high-definition satellite TV service."
Oh, and if that wasn't enough, Cablevision is also mulling over whether to seek a merger with bankrupt cable operator Adelphia Communications.
Apparently, Meckler contacted Paid Content about the Jupiter Research rumors: "These have been going on since Gartner announced the Meta deal. We have no deal going on -- however we are always for sale as a company -- that is the fiduciary obligation of a CEO for a public company. We also owe to stockholders to listen to any offer..."
Barry Diller's $1.96 billion bid for Ask Jeeves is too low -- at least, that's the opinion of an Ask Jeeves shareholder who's suing the company. The lawsuit could jeopardize IAC's acquisition of the company. According to the New York Post, Ask Jeeves shareholder Richard Wiltsie filed suit in a Delaware court complaining that the company's board of directors "agreed to the deal without fulfilling their most basic obligation to conduct a full and fair sale process to get the best price."
The details are just coming in, but it looks like Barry Diller's IAC/InterActiveCorp is putting together a $2 billion acquisition bid for Ask Jeeves. The rationale for acquiring Ask Jeeves, the fourth-largest search engine company, is clear: "Advertising spending on search sites is rapidly growing and Mr. Diller's company appears to be trying to tap into a market dominated by Google and Yahoo."
The BBC notes that both the Wall Street Journal and New York Times are reporting that a formal announcement could take place as early as Monday.
McGraw-Hill will acquire consumer quality and satisfaction ratings provider J.D. Power, considered by many to be "one of the most-courted information properties on the market." Outsell Now comments on the significance of the transaction, calling it "a sign of the ongoing convergence between the ad/media/marketing and the market research industries."
In the press release announcing the deal, McGraw-Hill says that "the addition ... will significantly strengthen our core business information platform by providing a new direct link to consumers, while also providing new collaborative opportunities with our leading franchises including BusinessWeek, Platts, McGraw-Hill Construction, Aviation Week and our healthcare group."
According to sources close to the New York Post, an investor group led by Edgar Bronfman, Jr. is planning to take Warner Music Group public anytime within the next 30 to 60 days. The IPO could raise anywhere from $750 million to $1 billion for Warner Music, currently the world's fourth-largest recording company with 38,000 artists (like Madonna and Green Day) under contract.
Jay Rosen of PressThink weighs in on the $410 million acquisition of About.com by the New York Times. The business rationale for the deal, says Rosen, has to do with About.com's search engine expertise -- something the New York Times currently lacks:
"They know how to show up in search; we don't. Let's buy them. Then we'll know too."
While About.com, with its 500 or so niche content sites, currently has 22 million monthly readers, the New York Times only has 13 million readers. That's because About.com and similar sites "know how to design pages that find their way into search engines, and thus have a second life." By some accounts, only 20% of readers see an article when it is new and featured -- the other 80% see it only after it's been archived. Once the New York Times learns to optimize its pages for search (such as by including permanent links to older archived content), its monthly readership will likely increase significantly -- and that means more advertising dollars as well.
The New York Times Company announced plans to acquire About.com from parent company Primedia at a price tag of $410 million. The deal will have a two-fold impact --it will add a "fast-growing, highly profitable" Internet destination to the company's portfolio and enable the New York Times to boost its revenue from the rapidly-growing online advertising business. By adding About.com's 22 million monthly users to its stable of over 40 Internet sites, the New York Times is poised to become the 12th-largest presence in the online world.
Paid Content, as usual, has an exhaustive source of details, data and facts about the deal. (On February 8, they correctly predicted that the New York Times would emerge as the victorious bidder for About.com). A quick snippet from Rafat Ali of Paid Content:
"Make no mistake, it is about search/CPC ad revenues in the short term, first and foremost. Then, of course, the benefits of added traffic over long term. It will be very interesting to see how they execute on the integration of NYTimes.com and About.com. The phrase "adding an alternate model of content creation and aggregation" is a peculiar way to put it, but it denotes blogs and the whole blog media world, so to speak. In short, this is NYT's blog strategy, on the editorial side. Whether they want to characterize it as such, that I doubt... "
James J. Cramer of TheStreet.com thinks that Barry Diller's IAC/InterActiveCorp should make a bid for Cendant: "Together, they would become the unstoppable destination portal for both travel and real estate. It won't happen now because it's too logical; not enough money has been lost yet, but it should happen."
From Crain's New York: the Internet unit of Manhattan-based Major League Baseball will acquire Tickets.com, an online seller of sporting events and entertainment tickets, in a deal valued at $66 million. According to Crain's, "the acquisition of Tickets.com will allow MLB Advanced Media to centralize its online operations."
Manhattan-based Emerging Pictures is setting up a cross-country digital cinema network, says Crain's New York. The cinemas, slated to appear primarily in museums and performing arts centers in "smaller markets," will show a mix of independent and foreign films. The guy bankrolling the venture is Internet entrepreneur Jeff Skoll, best known as one of the co-founders of eBay.
At the urging of its majority shareholders, New York-based publisher Primedia is looking to sell Internet portal About.com -- the company that was "once a central part of the corporation's old media/new media strategy." Valued at approximately $690 million during the peak of the Internet boom, About.com will fetch significantly less in today's market (in the "several hundred million" dollar range). It's not just publishers like the New York Times that have expressed interest in the company -- both Yahoo and Google have also poked around in the past few months, says the New York Post.
So how would Google be able to integrate the site into its current offerings? Susan Mernit lists four different ways that Google could mix-and-match the pieces of the About.com properties.
From Crain's New York: Manhattan-based Primedia has acquired Americanhomeguides.com, a Web site for homebuyers, from Internet advertising firm American Home Guides for an undisclosed price. The site features new homes from professional home-builders and developers nationwide (including Northern New Jersey) and also provides information about communities and floor plans. According to Primedia Consumer Guides CEO Bob Metz, the acquisition will give the company a "strategic platform from which to launch additional print versions of its New Home Guides in new markets."
Manhattan-based video games publisher Take-Two Interactive Software bought all of Sega's sports game development studio, Visual Concepts Entertainment, and its wholly owned Kush Games studio, for $24 million in cash. Take-Two will then turn around and launch a new game label, 2K Games. The story's already been Slashdotted, where readers weigh in on the consolidation of the sports games market. Greg Costikyan, too, has a nice piece on the strangulation of sports games.
Crain's New York reports that IBM will acquire California-based software management firm Corio for $182 million in cash as part of an attempt to expand its market reach to small- and mid-sized firms. InternetNews.com, for its part, views the move as another "on-demand" play for IBM.
Interestingly, the article hints indirectly that the Oracle-PeopleSoft deal may have tipped IBM's hand. IBM spokespersons, though, denied the possibility: "The timing of the acquisition, coming as it did after Oracle succeeded in its hostile takeover of rival enterprise application provider PeopleSoft, was coincidental... The deal was in the works long before Oracle took over PeopleSoft."
From Crain's New York: Manhattan's Imaginova Corp. (formerly known as Space Holdings) has acquired Orion Telescopes & Binoculars, which sells telescopes and other astronomy equipment, for an undisclosed price. Space Holdings, which owns a number of astronomy and science-related properties like Space.com and LiveScience.com, was formed in 1999 during the peak of the Internet boom by CNN business news anchor Lou Dobbs.
