BLP Perspective: The Week of July 29th in Review*

Earnings Reports

LinkedIn2LinkedIn and Yelp!  were this week’s stories. LinkedIn’s sales are on fire—up 59% year over year.  Sales at the core recruiting tools business increased 69% to $205.1 m  (an indication that our economy is improving), while it’s marketing-solutions business, including advertising, grew 36% to $85.6m, and finally, premium subscriptions grew 68% to $73.0m. LinkedIn is more valuable to me than FaceBook.  FB is nice for keeping in touch with friends; LinkedIn is valuable to my business.  Enough said.

 yelp_logo_100x50Yelp!’s revenues beat analysts estimates with revenues of $55m and a loss of  $878,000.  Yelp continues to expand into new geographies, France and Spain, and new markets—beyond restaurants.  Yelp! has recovered nicely from the wallop Google gave it some time ago.  The stock price is now $57, almost 4x their IPO price of $14 per share in March 2012.  Should have bought that stock.

We should pause for a moment to consider that the two companies most of interest in the earnings space last week were founded in 2003 and 2004.  And that the majority of Yelp!’s page views occur on smartphones, which did not have apps until the iPhone was introduced in 2007.

Next week, Rackspace is the one to watch.  Branding itself as the “Public Cloud” Rackspace is in a ferocious battle for market share with several huge companies.  While the market is growing at stunning rates, that growth is accompanied by regular price declines, and Rackspace’s original business of running private data centers is slowing down.  New, and lethal market entrants are Google, Microsoft and IBM, and Amazon, with AWS.  Amazon is the 10,000 pound gorilla, and is the one to beat.   Ugly competitive market.  Best wishes to Rackspace.

IPO’s of the Week[1]

There were three IPO’s of interest this week.  Control4, founded in 2003, is a $100m company engaged in home automation systems; Marrone is a small bio-based pest control company; and Sprouts Farmers Market operates a chain of 163 stores that sell natural and organic products at “compelling” prices in the Southwest.   Shouldn’t SFM merge with Marrone.  At first blush, it appears to be a ‘natural’ fit.

Company Ticker IPO Price ($) Today’s Price ($)
Control4 CTRL 16.00 27.56
Marrone Bio Innovations MBII 12.00 13.18
Sprouts Farmers Market SFM 18.00 40.00

For the time being, Control4 is growing smartly, and able to pretend SmartThings, a notorious open-source smart-home start-up, doesn’t exist.  SFM is on fire and appears to be able to compete head-on with Whole Foods in the ultra-competitive grocery market.

M&A of Interest

Apple continues it’s buying spree, with the acquisition of Passif Semiconductor. Passif’s technology is speculated to be crucial to the unannounced iWatch product.  Passif device technology enables contactless and wearable payment products.   The iWatch development has hit some unspecified technology roadblocks, for which Passif could be the answer.  Passif is located on Shattuck Ave, in the heart of the Peoples Republic of Berkley.

Higher One, a leading payment processing company in the higher education market, purchased PayDivvy, which enables student-to-student payment systems, and group bill payment with roommates or other groups.  With a 16 year-old stepdaughter, we’ll be familiarizing ourselves with these systems in about two years.

Private Placements

Hootsuite was the big private placement news this week.  The five-year-old social media management platform raised a $165 million Series B round, which brings the total investment to-date to $187 million.

The most unusual company raising capital may be BioBeats, which raised a seed round of $650k.  These guys generate music that is dynamically generated from your unique heartbeat.  Can’t wait to try it out!  As a matter of fact, I sent the Company information along to my favorite MGH cardiologist.

Finally, Jifiti, based in Columbus, raised $2.5 million for a gift card that enables users to give specific items via in-store barcode scans or online purchases.  The big mall operator, Simon Property Group, was one of the investors.

Also of Interest

Snowden is now in Russia for a year.  Does anybody care to speculate where he will find employment?  In Siberia?

Margaret S.C. Johns

Founder, BlueLake

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*This newsletter does not purport, in any sense, to be comprehensive.  Rather, it contains news that we, at BLP, find of interest.

[1] Certain information sourced from Renaissance Capital