SIFY Earnings Report Analysis-The Good, The Bad, and....The Very Good.
SIFY came out with Earnings today morning. The stock dropped 12.63%, and as I write this, is down another 5% in After Hours. The After Hour drop is in sympathy with YHOO's earnings report, which has that stock down 12% and the Internet sector in a Sea of Red.
Let's analyze SIFY's earnings report more closely. As I have said in a previous post, the main business which makes me an investor in SIFY is the portal business. Even though it seems small in comparison to SIFY's other business, that's where the brand will play out in the coming years, that's where the money is, that's where the margins are. Witness YHOO, AOL, CNET. Extremely high margin businesses.
The portal business revenues grew from 0.59M to 1.07M year over year. That's almost 100% growth. The Q over Q growth was a very impressive 18%. The business is doing well, and will do well for many years to come, maybe even decades to come.
Note that the portal business is headed by Mr. Surya Mantha. Mr. Mantha was with Real Networks before taking up this job at SIFY. He has been with product management and marketing at Real. I am very happy that someone with such an impressive resume heads a business I own shares in.
The other businesses are low margin businesses. As you saw with the evolution of AOL, Inc. in the United States-the high margin business of Internet access when AOL was born was turned into a very low margin ISP business; but AOL the portal remained, and fetched $20B value tag from none other than Google (Google bought 5% for $1B in cash). Even if the other businesses off SIFY run at breakeven, the fact that it puts the brand in people's heads is enough for it to make it a good business to have-if you are consulting with SIFY on Enterprise services, it is logical that you will check out their portal one of these days, knowing already that it is one of the major portals in India.
I look at the present sell-off as a buying opportunity. Likewise, the YHOO sell-off is another buying opportunity in the US Internets. My proxy is HHH, the Merrill Lynch Internet Holder Index Share ETF. That has all the big US Internet companies in it-AMZN, EBAY, CNET, etc...
If you see the far out picture, the Internet story remains in tact; both in India and the US. Sell-offs are buying opportunities specially for the Indian Internet sector stocks like REDF and SIFY-they are going to be major kahunas of the sub-continent.
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Sanjay John G.
Let's analyze SIFY's earnings report more closely. As I have said in a previous post, the main business which makes me an investor in SIFY is the portal business. Even though it seems small in comparison to SIFY's other business, that's where the brand will play out in the coming years, that's where the money is, that's where the margins are. Witness YHOO, AOL, CNET. Extremely high margin businesses.
The portal business revenues grew from 0.59M to 1.07M year over year. That's almost 100% growth. The Q over Q growth was a very impressive 18%. The business is doing well, and will do well for many years to come, maybe even decades to come.
Note that the portal business is headed by Mr. Surya Mantha. Mr. Mantha was with Real Networks before taking up this job at SIFY. He has been with product management and marketing at Real. I am very happy that someone with such an impressive resume heads a business I own shares in.
The other businesses are low margin businesses. As you saw with the evolution of AOL, Inc. in the United States-the high margin business of Internet access when AOL was born was turned into a very low margin ISP business; but AOL the portal remained, and fetched $20B value tag from none other than Google (Google bought 5% for $1B in cash). Even if the other businesses off SIFY run at breakeven, the fact that it puts the brand in people's heads is enough for it to make it a good business to have-if you are consulting with SIFY on Enterprise services, it is logical that you will check out their portal one of these days, knowing already that it is one of the major portals in India.
I look at the present sell-off as a buying opportunity. Likewise, the YHOO sell-off is another buying opportunity in the US Internets. My proxy is HHH, the Merrill Lynch Internet Holder Index Share ETF. That has all the big US Internet companies in it-AMZN, EBAY, CNET, etc...
If you see the far out picture, the Internet story remains in tact; both in India and the US. Sell-offs are buying opportunities specially for the Indian Internet sector stocks like REDF and SIFY-they are going to be major kahunas of the sub-continent.
Subscribe now to The Wall Street Journal and get up to 8 weeks FREE
The Prudent Speculator -- Ranked #1 by Hulbert for 10, 15 and 20 year performance...Click Here!
If you subscribe to the Wall Street Journal or the Prudent Speculator(a Forbes.com publication) using the links above, I get a commission.
Sanjay John G.
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