Dot-Com Sales Lower This Year
In its half-year look at sales of Internet-related companies, Webmergers finds e-commerce plays popping up as 'islands of vitality' in an otherwise battered sector.Spending on Internet-related properties jumped by 63 percent from the first quarter to the second quarter, led by a flurry of e-commerce sales. But the activity is much lower compared to last year, according to Internet-focused mergers and acquisition firm Webmergers.
The San Francisco-based company, which tracks Internet-related sales, said deteriorating valuations of publicly traded technology stocks and an increase in bankruptcy and asset sales led the year-to-year decline.
Total spending during the first half of the year on Internet-related purchases was $12.7 billion, up 63 percent from the first quarter. But the amount was 43 percent lower than the $22.4 billion spent in the same period of 2001.
The data show that a handful of large e-commerce services deals contributed to the leap in the second quarter. Dot-com, e-commerce and content sales increased more than six fold in the second quarter to about $2.8 billion compared with just over $400 million worth of activity in the first quarter.
$1.3 billion acquisition of online broker Datek Online and buyout firm Francisco Partners' $800 million purchase of GE GlobaleXchange Services helped drive second quarter numbers in the e-commerce sector.
But overall, Internet infrastructure properties are still the most desirable purchases among deal-makers, accounting for just over 60 percent of both spending and individual deals, Webmergers said in its half-year report. During the same time last year, enabling software and hardware companies that comprise the infrastructure sector accounted for only 45 percent of first half spending.
Webmergers said other active categories in the first half included online billing and payment infrastructure, managed services, security, equipment and software to enable e-business applications.
Asset sales among depressed, bankrupt or struggling ISPs, hosting companies and some e-business infrastructure properties rose to 151 in the first half of this year, up by close to half from the same time last year.
Destination sites continued to slide in M&A popularity as well. In the first half of this year, destination site sales accounted for about 25 percent of spending, compared with 38 percent of total Internet-related purchases during the first half of last year.
In sum, the results show that the continued shakeout that began over two years ago is still working its way through Internet and technology companies, forcing losing Internet business models into bankruptcy and into fire sale prices in some cases.
Webmergers said the trend throughout the past 18 months is that flurries of sale activity are popping up in emerging "islands of vitality," defined broadly as online e-commerce services such as travel, recruitment and e-finance.
Even in the e-finance sector, which is under pressure amid the continued sell-off in broad markets recently, acquirers spent $1.6 billion to acquire two dozen properties so far this year, including E*Trade Group'spurchase of online securities trading platform Tradescape, Inc. for $100 million and Bank of Montreal-affiliated online broker Harrisdirect's $106 million purchase of some online accounts of Morgan Stanley's individual investor unit.