Price movement
Looksmart listed in February 2000, one month before the technology bubble peaked. It has fallen from a high of $5.50 to a low of 7 cents. The drop in share price has been unrelenting. Looksmart has weathered the tech wreck maelstrom and appears to be a survivor. Its revenues have grown and it is now profitable. Long-suffering shareholders may have written it off but it is finally becoming valuable.
Profile
Looksmart provides the software that helps advertisers and users make targeted searches on the internet. Businesses pay to have their websites included in the Looksmart web directory.
Its businesses are derived from four areas: listing - providing target marketing software for clients' websites; advertising - fees from promoting advertisers' websites; licensing - income from licensing and customising its directories; and e-commerce - its own shopping website, Buy It on the Web.
The founders of Looksmart are Australian but the company is listed directly on the American NASDAQ sharemarket. The shares trade in Australia at a ratio of 20:1 to the NASDAQ share price.
The success of the company is founded on its ability to pursue and maintain relationships with media companies, internet service providers and leading portal websites. This creates a broader search for its clients.
Current details
Looksmart's fourth quarter 2002 results released in January showed a
55 per cent jump in revenue to $248 million and it made a maiden full-year net profit of $5.7 million. The company holds $83 million in cash.
The company will continue to reinvest in product development and search technology programs, as well as investing in sales and marketing personnel to drive growth in its main markets, the UK and Japan.
The company will be reporting its first-quarter 2003 results
at the end of this month with a $5 million net profit expected. This could well place the company on track for a $20 million 2003 full-year net profit. There are no immediate prospects of dividends as the company reinvests its profits for further growth.
Sector
Looksmart has no listed Australian competition for its services. The US is the main market for computer technology, but Looksmart's key markets are Japan and the UK. Yahoo!, the global internet company, recently took over Inktomi Corp, a web search provider similar to Looksmart. There will be further industry rationalisation that also makes Looksmart a potential target. Using the same valuation methods used for Inktomi would place a 40 cent value on Looksmart.
Worth buying?
For investors who missed the tech boom, now is the time to buy Looksmart. Its prospects appear sound and improving. It would be an excellent additional diversification to a long-term investor's portfolio. Buy.
Geoffrey Hill is presenter of ABC News Radio's daily afternoon finance report and is an independent private client adviser. Email gh@ghill.com.au
