Monday, January 31, 2005

SBC Directories going on the Block

Well, SBC denies it, which is the surest sign that it's coming.

The acquisition of AT&T for $16 billion can only be financed by SBC showing huge opportunities for growth. While their directory business is a cash cow, spewing cashflow, it's a no growth business.

Competition from the independents, the internet and their SBC's sheer size have put the directory business in a no growth mode for many years. The future doesn't show any flashes of brilliance on how they will get the elephant to dance.

In short, SBC has a great directory business, just not a growing directory business.

Wall Street punishes companies that can't promise and deliver consistent growth. It doesn't make sense, but it's the way of the jungle.

I have several conversations over the weekend with people close to the subject, and no one seems to know how soon it will happen, but the general consensus is that it WILL happen.

I believe that we'll see the directory business sold off in big chunks to financial buyers. It's incredibly large to consider selling to one investor, and by breaking it up, they can separate the better growing areas from the dragging areas.

What does this mean for advertisers? Well, probably not much in the short term, but over the next few years, the pressure will be cranked up high on the company to produce better results. That's generally good for advertisers who will be key to the company's success.

Anyone want to place a bet on when they announce they're "seeking strategic guidance from an investment banking firm?"


Anonymous Anonymous said...

If this happens, how would SBC Inc would replace the net income that the DO provides with less than 10% of the net revenue? If there is one business constantly under the radar at investor calls, quarterly reports, etc... is the Directory Business, and I guess that is by design.

9:41 AM  
Anonymous Call Me Wily Fox said...

In a similar move - let's examine how BellSouth Advertising will, in March, replace it's Sales oriented President (Elmer Smith) with a Finance oriented President (Ike Harris). Is BellSouth Advertising working on getting it's numbers in place for a sale and a cash windfall to parent company BellSouth? BellSouth's desire to become more aggressive in it's development of new technology line and wireless infrastruture is challenged by it's need to protect investor profits. Only a huge cash influx could satisfy both objectives. The telco's are betting that print advertising will disappear as online usage grows and they are trying to cash out their directories before the value plummets. Overall it appears that the phone company mentality is driving decisions to hold on to the low margin telecom sectors and divest themselves of the high profit subsidiaries. In the long run the telco's will find themselves with infrastructure developed far beyond demand, making small margins and probably crying for government help. This is what happens when you get too many MBA's together, managing a business by reports and metrics and totally lacking common sense and street level understanding.

7:26 PM  
Anonymous Anonymous said...

I think Dick's comment is un-called for. Although I am not a supporter of SBC YP..... the comment is not appropriate comming from someone that works at a competing company. FACTs only please. Not enough fact to back up your statement. January??? This is now October. Won't happen... Good attempt at spreading "rumor" to keep a competitor down. Also Verizon was having subpar revenues until now..... meanwhile Verizon will still take it to competitors and keep innovating.

9:56 AM  

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