United Online (UNTD) Looks For Redemption

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United Online (UNTD) is in a crummy business. It sells dial-up internet service to about five million online customers. It is the business that AOL exited last year. Broadband has made it obsolete. The company’s revenues are only about $130 million a quarter.

United has a market cap of $900 million, so it trades at less than 2x sales. Its stock has gone nowhere since 2003.

But, all of that may be about to change. United also owns Classmates.com, a large social network set up to put together people who were in school at the same time. UNTD filed an S-1 yesterday to IPO Classmates and raise $125 million.

In the quarter ending March 31, Classmates had revenue of $42.4 million and lost $250,000. The business is growing. Revenue in 2005 was $84.8 million. Last year, that number rose to $139 million.

Based on the numbers that get thrown around for the value of Facebook. Classmates could be a high-priced property. It could well be on its way to revenue of over $200 million this year.

If so, Classmates is worth well over $1 billion, more than United’s entire market cap.

Douglas A. McIntyre