Move Inc, the owner and operator of move.com, realtor.com and Top Producer is trading at 5 year lows – can they turn around the business?
Not since April 2003 has move.com traded at lower price levels. In those days, the business was coming out of the scandal of the early 2000’s in which revenues had been incorrectly inflated. The challenges that Move faces today are far different.
Firstly the business is highly diverse. They have the following operations:
- Realtor.com – accounts for ~42% of overall revenues
- Web Site Hosting and Design
- Top Producer – accounts for ~10% of overall revenues
- Move New Homes
- Move Rentals
- Welcome Wagon – accounts for ~11% of overall revenues
- Display Advertising Sales
In addition to running a diverse set of opeations, the business has a high cost structure with around 1,500 employees.
Secondly, the business is being attacked from multiple sides – most obviously by zillow.com and trulia.com – who are competing for eyeballs and the advertising dollars.
Finally, the business is being compared with similar listed business in other countries that are performing significantly better. These businesses are generating up to 50% EBITDA margins while Move Inc manages only to break even.
|Market Cap 24 Nov||12 Months to 30 June 2008|
|Company||Currency||Local Currency (m)||US$ (m)||REV (m)||EBITDA (m)||EBITDA %||NPAT (m)||NPAT %|
|Seloger||Euro||€ 192||$246||€ 57||€ 30||52%||€ 14||24%|
The result is that Move Inc trades at a significant discount to its global comparatives.
So what can they do?
Here are the top 5 things that they can do to potentially move the business in the right direction.
- Exit the non-core businesses – Move Inc is already doing this and have already exited the homeplans business. They have also announced they are exiting from the Welcome Wagon business – they should do this, even if it means closing it down (as a last resort). They should also explore exiting the Web Site Hosting and Design business and Top Producer.
- Dramatically reduce costs – Move Inc needs to really stream line its operations. They need to make sure that they have no wastage including removing unnecessary overhead costs and reducing head count to more optimal levels. Competitors like Zillow and Trulia are already doing this. Move Inc has already announced some cost reduction targets however are they truly cutting deep enough?
- Consolidate its position in the core For Sale advertising market – Move Inc should explore acquiring Trulia (but probably not Zillow) to expand its foot print in the core For Sale market.
- Expand into more attractive segments of the US real estate market – Move Inc needs to execute significantly better in the rental segment and should move into the commercial segment. LoopNet dominates this segment and is relatively unchallenged.
- Explore expansion into attractive international markets – Move Inc should actively explore how it can expand its operations into the more attractive international markets. One way it could do this is to acquire or merge with the likes of the REA Group, Rightmove or Seloger.