Flower sales boost United Online earnings, stock takes off

The stock market tanked again today, but for one SoCal Internet company everything came up roses. United Online's shares rose nearly 9%, a day after it said third-quarter sales bloomed thanks in large part to its recently acquired FTD business unit.

United Online has been best known for its dial-up Internet access services, including NetZero and Juno, but that's dying out as the world moves to broadband. So the Woodland Hills company has been diversifying by snapping up businesses such as Classmates.com, a social networking service, and FTD, the seller of flower products.

The company said Wednesday in its earnings report that net income rose 16% to $16.2 million, or 21 cents a share, and revenue rose 33% to $169.2 million. The FTD acquisition, completed in August, contributed $48.3 million in sales. Without it, United Online's revenue would have fallen 5% year-over-year.

It also got help from Classmates.com, which helps people connect with old school chums. The service added 278,000 paying subscribers. Revenue for Classmates Media, which also includes the My Points loyalty online marketing service, rose 18% to $58.7 million. That almost offset a 19% drop in revenue from the Internet access business. To give an indication of how progress is viewed in the dial-up business these days, during a conference call with analysts Chief Executive Mark Goldston bragged that the company lost only 91,000 Internet access subscribers, which he said was the "first time in a long, long time that we’ve been below 100,000 in net subscriber declines."

"Good results at Classmates Media and prospects for growth/margin improvements at FTD are helping the company move further away from its access roots and into growth opportunities," Youssef H. Squali, an analyst with Jefferies & Co., wrote in a report today. He said he was optimistic about the company's prospects for driving sales by promoting FTD through other United Online businesses, but he noted that the company's $423 million in debt has made it a riskier investment.

United Online's shares gained 60 cents, nearly 9%, to $7.40 today. Still, the stock is down more than 57% in the past year.

-- Chris Gaither

Flower bouquet photo by Dyanna via Flickr

Comments

[Ken Bolt]

It is good to see United Online makiing financial progress with their recent acquistion of FTD. As a REAL full service retail florist in a declining industry, I am concerned about the future of real florists. Today, most florists are not doing well, not only because of the economy, but also because of thousands of web sites gathering orders that are operated by third party affiliates who have no flowers. FTD has spawned thousands of send only office operations that gather orlers on the web and then send them to REAL florsits to actually fill and deliver the flowers or gift. The cost to the REAL florist is over 30% of the order value in commissions and fees and the consumer usually has to pay an extra service fee between $10 and $15 to the order gatherer. Most of the REAL florists will be destroyed over time by this system as few businesses can afford to shell out over 30% of each order to third parties who contribute zero to the value equation. The proof shows up in the census figures.........the number of US florists declined by 25% from 1996 to 2006. I can only hope that the public wakes up to the scam or that United Online figures out a better way to do business. Perhaps Google Local will solve the problem.