Monday, November 20, 2006

Color on news: Monster Worldwide (NASDAQ:MNST)

Couple of firms commenting on Monster Worldwide (NASDAQ:MNST) after The Wall Street Journal reported over the weekend that Yahoo (which owns HotJobs) is close to an alliance that with enable 6 newspaper companies (that own >100 papers) to sell Yahoo/HotJobs job postings to help wanted customers.

- UBS believes alliance could hurt Monster by adding competition. Cynics may say it's too soon to say alliance will impact market share mix, but success of Careerbuilder (owned by Tribune, McClatchy, Gannett) makes us more concerned. Since newspapers bought CareerBuilder in '00, its rev share of online recruiting space has risen from what wthey think was <10% to rival MNST's; they think MNST & CareerBuilder now have about 20% share, versus <10% for HotJobs.

They worry alliance could hurt Monster's effort to add more local/small business customers. Firm estimates that small business customers contribute only about 40% of Monster's revenue now; but, they think this customer base will make or break Monster's growth story given that the Enterprise segment of the market is maturing.

UBS is leaving their estimates unchanged. However, this announcement does add another element of caution to Monster thesis; they were already cautious based on concerns about labor market slowdown. Maintains Neutral and $49 tgt.

- Wachovia notes the news also further validates their belief that a YHOO purchase of MNST is unlikely. They view this as a modest negative for MNST as it has hoped to partner up with mid-market newspapers.

Given MNST's desire to expand its local presence, the firm views the potential YHOO agreement as a negative in the sense that 4.6M of daily circ. & potentially 1.2M help wanted related unique online visitors will be moving to a competitor with a 5-yr deal. Firm assumes YHOO gave the newspaper co's better economics given its position as the #3 player. It also suggests newspaper co's are willing to partner with Internet co's which may have been viewed as "the enemy".

Maintains Mkt Perform and $38-$40 valuation range.

Notablecalls: Expect to see moderate selling pressure in MNST today. I was negative on MNST on Sept 29, calling for extended weakness. Obviously, I was wrong. Grain of salt anyone?

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