Thursday, April 05, 2007

Paperstand (GOOG, SVVS, CBEY, BSG)

The WSJ reports that Apollo Mgmt, possibly joining the rush by buyout firms to cash in on their successful investment records, is exploring the private sale of a 10% stake in the firm for $1.5bn. The firm has retained investment bankers to study such a deal, which would allow founder Leon Black and his partners to sidestep the hassles and heightened scrutiny involved in a public stock offering. Should Apollo pursue a deal that values 10% of the firm at $1.5bn, Mr. Black could net as much as $750m.

According to the WSJ, Google (GOOG) is releasing a new feature called My Maps that lets users annotate online maps by marking locations with notes, video and photos and then share them with friends or the public. The move builds on Google's popular Maps service, which tech-savvy users have harnessed to build a wide range of customized maps displaying information such as Chicago crime statistics and listings of homes for rent or sale.

Barron’s Online highlights Savvis (SVVS), saying that it doesn’t take a savant to see that the telecom business is in a period of wild excess. Savvis, a so-called alternative telecom co deep in the red, will quintuple its spending this year over the previous year to host Websites for a fee for marquee clients such as Reuters. Excess sometimes can be mistaken for success. And sell-side analysts speculate that Verizon (VZ) and other large telcos might acquire such fast-growing outfits for a hefty premium. That kind of speculation has helped Savvis shares more than double in the past 12 mo’s.

But if you're not one to bet on buyouts, it may make more sense to look for alternative high-growth telecom firms that are also profitable. One such firm may be Cbeyond (CBEY). Cbeyond's shares have also appreciated smartly, up 72% in the last 12 mo’s, but the stock is still cheaper than Savvis', based EBITDA, despite what should be heady sales growth of 30% this year. A valuation closer to Savvis' would suggest 20% upside to Cbeyond's stock. Like Savvis, Cbeyond has a business that fits with what large telecom co’s do and that's growing fast. Cbeyond's enterprise value, including cash of $44m, is a multiple of 16x the co's expected ’07 EBITDA, compared to about 19x for Savvis' EV. Thomas Weisel Partners' James Breen thinks that 16x multiple makes the stock undervalued; he rates the shares a Buy.

Barron’s Online “Inside Scoop” section reports that some investors are losing confidence in Bisys’ (BSG) search for a buyer, but the founder of hedge fund Okumus Capital believes he can help the co, and he's put his money where his mouth is. Okumus Capital purchased a total of 504K shares for $6m in two separate transactions over the past month. The purchases boosted Okumus Capital's stake to 10.6%. Ben Silverman, of, notes that the stock did not climb significantly on news of Ahmet Okumus' large buy. The purchase was "positive, but it's mitigated just by the lack of visibility in terms of what will happen from an operational standpoint and from a strategic standpoint."

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