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Wall Street Punishes Monster; CareerBuilder Has a Say

Monster LogoMonster is getting beat up on Wall Street today. The stock opened down and went lower, and is off 16 percent right now, a clear signal that the markets don’t like what the company announced yesterday.

It announced that it had bought HotJobs for $225 million and that it lost money in the last quarter of 2009.

The HotJobs purchase brought it a sharp rebuke from Deutsche Bank analyst Jeetil Patel who downgraded Monster from a HOLD to a SELL. He said Monster “overpaid” for the acquisition, which will cost it $225 million. His change of heart about the company was also based on Monster’s 4th quarter loss and his belief that improvement in the job board industry will be slow.

No other analyst took as strong a position as Patel. The AP reported that Credit Suisse analyst John Blackledge, who has a “Neutral” rating on Monster, said while current operating results are not impressive, things are improving.

Meanwhile, CareerBuilder issued a four-point statement this morning, that essentially contradicts Monster’s claims of traffic supremacy, questions the wisdom of the deal, and wonders what impact regulatory review of the transaction may have.

CareerBuilderThe statement’s four points are:

  • CareerBuilder is the clear leader in North American revenue and will continue to be even if the deal goes through.
  • CareerBuilder has been the U.S. traffic leader since 2004 and will continue to be in the future.
  • History could repeat itself and Monster will have a difficult time securing regulatory approval.
  • Yahoo traffic does not monetize effectively.

In detail, here’s what CareerBuilder had to say:

“CareerBuilder is the clear leader in North American revenue and will continue to be even if the deal goes through.In 2009, CareerBuilder’s North American network revenue totaled $542 million compared to Monster’s $407 million. Estimates of HotJobs’ 2009 revenue were $80-$100 million. CareerBuilder’s positive revenue trend and associated increasing market share have been steadily increasing since 2006 when we became the undisputed market leader. As of today, even if the acquisition is approved and it is completely accretive to Monster, CareerBuilder’s $542 million revenue remains greater than the combined Monster/HotJobs at approximately $487-$507 million.

“CareerBuilder has been the U.S. traffic leader since 2004 and will continue to be in the future. Monster will most likely run the business as two separate companies with separate products and separate revenue streams. In that situation, CareerBuilder’s industry-leading 21 million unique visitors per month will remain the leader over Monster’s average of 11 million unique visitors per month. In line with CareerBuilder’s current portal traffic deals and Monster’s previous portal traffic deals, Monster should expect an additional average five million unique visitors per month from Yahoo, leaving CareerBuilder the undisputed leader in traffic in the U.S.

“History could repeat itself and Monster will have a difficult time securing regulatory approval. Monster attempted to buy HotJobs in 2001. After an initial review that spanned several months, the federal government announced it would conduct a second round of reviews. The HotJobs board ultimately chose to sell the company to Yahoo instead. This transaction will require an intense U.S. Department of Justice review. This deal could take an extended period of time to close. During that time both Monster and HotJobs will continue to lose market share to CareerBuilder.”

(Here’s some background on the previous bid by Monster for HotJobs. The deal in 2001 had gone so far that Monster even issued a press release saying it was buying the company, only to find Yahoo had outbid it. Marc Cenedella, now CEO of The Ladders, was on the negotiating team back in 2001 and posted the press release on his blog.)

“Yahoo traffic does not monetize effectively. Yahoo purchased HotJobs in 2001 for $436 million. They are planning to sell HotJobs to Monster for $225 million today, a decline in the value of HotJobs by nearly half. During the same period, CareerBuilder’s revenue has grown 500 percent, while HotJobs revenue has declined over that period of time. It is clear the Yahoo traffic does not lead to revenue growth and market share gains. We don’t expect that to change when Monster takes over that traffic.”

What’s particularly interesting is CareerBuilder’s estimate that HotJobs had 2009 revenue of $80-$100 million.

Besides being in line with the guesstimates of others in the industry, it’s an indication that the chaos at Yahoo has made HotJobs a poor cousin. While all job boards have seen year-over-year declines in revenue, even at the upper end of the estimate, HotJobs would have been losing ground faster than many others, and this would have been occurring while its traffic was surging.

That certainly lends support to CareerBuilder’s fourth point about the value of the traffic. “It is clear the Yahoo! traffic does not lead to revenue growth and market share gains,” CareerBuilder’s statement says. “We don’t expect that to change when Monster takes over that traffic.”

Them’s fighting words, but probably a bit overstated. Yahoo’s internal struggles over what business it wants to be in — and its C-suite shake-up — certainly diverted focus. And, of course, HotJobs has been for sale since at least the summer of 2008. Monster, incidentally, began making a serious run at the company at least as long ago as October 2008 when it signed an NDA with Yahoo! No wonder at yesterday’s analyst conference call Monster CEO Sal Iannuzzi said, “This was a long and interesting negotiation.”

While CareerBuilder didn’t think much of the purchase, Dice Holdings CEO Scot Melland had a contrary view. He told me the deal “has the potential to be a win-win for both” Monster and Yahoo.

The devil’s in the details, of course, but Melland says Monster will get a big traffic boost and picks up some 600 media partners that have strong local sales teams. Even accounting for the overlap in customers, Monster will see revenue growth.

For its part, says Melland, Yahoo manages to shed an asset it no longer considers core to its business, while getting a brand-name player for its career channel. And it gets paid for the traffic.

Melland wouldn’t discuss whether Dice had taken a run at the HotJobs deal, though more than one industry source told me it had. However, he said the HotJobs acquisition would have little impact on Dice, which operates a few niche job boards, including the technology focused Dice.com and one for the financial industry.

For the broader industry, Melland said he thought the impact would become clearer over time. It does make Monster a much stronger player, he said.

CareerBuilder is the clear leader in North American revenue and will continue to be even if the deal goes through.
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