21 Dec 2009 18:28 Africa/Lagos
S&P Equity Research Issues Ten Internet Predictions for 2010
NEW YORK, Dec. 21 /PRNewswire/ -- As the decade that began with the announcement of the AOL/Time Warner merger ends with the Time Warner [TWX 29 ***] spin-off of AOL (AOL 23 NR), S&P Equity Research has issued a list of ten Internet predictions for 2010, addressing some of the largest and most important companies in the Internet segment as a new decade is about to begin.
"We expect considerable international deal making in 2010, challenges for search giants Google and Baidu, and IPO activity involving at least one major social networking company," said Scott Kessler, S&P Equity Analyst, Internet Software & Services and Internet Retail. "After covering the Internet segment for nearly a decade, I think it's fair to say that the online arena can change very quickly. Therefore, thinking about the upcoming year and offering predictions is worthwhile in helping to identify potential developments and prepare in advance."
Following are ten Internet predictions for 2010 from S&P Equity Research.
1. We foresee considerable international acquisition-activity in 2010. We think some larger U.S. Internet firms will allocate their substantial overseas cash and investments to acquire businesses abroad. We also think some U.S.-based Internet companies could be targets for international players looking to establish or bolster their positions, seizing upon the dollar's weakness to secure value. We also think eBay [EBAY 23 ****] and Yahoo [YHOO 16 *****] will make noteworthy overseas purchases.
2. We think at least one of eBay's global buys will center on continuing to build out its PayPal business, perhaps in the mobile area.
3. Despite notable efforts and those of its Chairman and CEO Eric Schmidt among others, Google [GOOG 596 ***] will continue to be targeted and somewhat restrained by domestic and international lawmakers and regulators, in our view.
4. We think Google will lose its search business with AOL to Microsoft [MSFT 30 ***] (the AOL/Google search contract is set to expire in December 2010). We believe Google's recent efforts to de-emphasize larger search deals, and political pressures, coupled with Microsoft's focus on gaining market, share will contribute to this change.
5. We expect Yahoo to further deconsolidate through the sale and/or shuttering of multiple businesses. We think divestiture activity could involve the Small Business Services unit, Zimbra, and the Personals business, among others.
6. Conversely, we think InfoSpace [INSP 8 ****], with what we consider a somewhat limited product/service portfolio and strong balance sheet, will look to do a relatively significant strategic deal, related to the search segment.
7. We see continuing considerable competition and pricing pressure in online music and games, and expect more challenges and consolidation in these areas. Our related call is a "sell" opinion on RealNetworks [RNWK 4 **].
8. We think at least one major social networking company will file to become a public entity in 2010. We think Facebook is most likely, given that in 2009, it announced it was looking for a new CFO with public company experience, and hired such a person, and created two classes of (private) stock to help existing shareholders retain control of the company. We note that a company with more than $10 million of assets and a class of equity securities with 500 or more shareholders as December 2009 has to file a registration statement with the SEC, roughly by the end of April 2010. We also expect LinkedIn to move closer to becoming a public company in 2010.
9. We don't expect Twitter to file to come public in 2010, but, despite indications that its growth trajectory has flattened somewhat of late, we expect the company to have a successful year, punctuated perhaps by monetization models and revenues. We foresee premium accounts and data and analytics offerings, for example.
10. We see considerable risk for Chinese Internet companies and equities, and believe regulatory concerns and actions will hamper performance for certain companies, including Baidu [BIDU 414 *].
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