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Burnham's Beat

Articles on Software Technology and Finance

2008 Internet Stocks: Year In Review Plus 10 Best and 10 Worst StocksJanuary 2

Internet stocks outperformed the market in 2008, albeit in the wrong direction.  Overall, the internet sector declined -52.2% during 2008 vs. the NASDAQ's -40.5% decline and the S&P 500's -38.5% decline.

Out of 128 year-end stocks in the sector, the average stock declined by -52.3% and the median stock declined by -56.2% indicating that declines were pretty well balanced across small and large cap Internet stocks.

It's interesting to note that Google, which accounts for a whopping 41% of the sector's capitalization was down 56%, slightly more than average, which means that Google actually underperformed the Internet sector as a whole.

Believe it or not, but only 4 Internet stocks or just 3% of the total managed to post a gain in 2008.  That means that 60% of the Top 10 performing Internet stocks of 2008 actually lost money.  See for yourself:

2008 Top 10 Best Performing Internet Stocks

About the only notable trend in the Top 10 was the strength of Chinese Internet stocks which is kind of surprising given that the main Chinese market was down 65% for the year.  Some of this may have to do with the fact that Chinese Internet firms already traded at very low relatively PE's prior to t

2008 Software Stocks: An Oveview Plus The 10 Best and 10 WorstJanuary 2

While software stocks got hammered in 2008, they basically declined "in line" with the rest of the market as the total software market cap was down 40.9% which is just about equal to the NASDAQ's 40.5% decline and just slightly worse than the S&P 500's 38.5% decline.  As I noted in my piece on 2008 Software M&A, total software market cap now stands about 25% lower than it was five years ago.  Ouch!

Out of 231 year-end stocks in the software sector, the average stock declined -45.8% indicating that large caps out performed small caps during the year.  The median stock declined -49.3% or put another way, about 1/2 of all software stocks declined by just about 50% or greater during the year.  Yes, it was as bad as you think it was

Just 16 out of 231 or 7% of software stocks managed a gain in 2008.   For amusement's sake, here's a list of the Top 10 stocks in 2008:

Top 10 Best Performing Software Stocks of 2008

A couple interesting notes about this list of winners:

2008 Software M&A: Year in ReviewJanuary 2

Unlike the Internet M&A space, the public software company M&A market was actually fairly robust in 2008 with 33 deals worth over $40BN closing.  That's actually up from 2007 when 28 deals worth $18.5BN closed.  That said, most of the increase has to do with several large, complex deals announced in 2007, including Nokia's purchase of Navteq and TomTom's purchase of Teleatlas, taking almost a year to close, but it remains that despite the terrible market, public software company was actually fairly robust in 2008.

2008 continues the long term trend of increased public software company M&A.  As the graph below makes clear, software M&A has been in a solid uptrend since 2004. 

# of Public Software Company M&A Deals

As outlined initially in a post several years ago on the incredibly shirking software industry there are a number of trends driving increasd M&A in the software space and these trends appear to accelerating.  The total number of public software companies decreased 11.5% in 2008 vs. 11.2% in 2007 and 1

2008 Public Internet M&A: Year In ReviewDecember 31 2008

2008 will not be remembered as the "Year of the Deal" in the Internet sector.  In fact, it is a year virtually all companies and investment bankers would prefer to forget.

There were a grand total of 9 public Internet companies acquired in 2008 and the largest of those deals, CBS's acquisition of CNET, was only $1.8 BN, hardly big enough to generate sufficient fees to keep Wallsteet's finest attired in bespoke suits.

The biggest news in the Internet M&A space was, of course, the deal that never happened: MIcrosoft's proposed offer to buy Yahoo!.   In the wake of this failed engagement there may be some big deals in 2009 as both Microsoft and Yahoo pursue other options, but for now 2008 will go down as one of the quietest, perhaps the quietest, years for M&A in the Internet sector ever.

           2008 Acquisitions of Public Internet Companies

Closed Target Acquirer $ Size 1/17/08 Visual Sciences VSCN Omniture OMTR $394 2/4/08 Traffix TRFX New Motion NWMO $159 3/18/08 Audible ADBL Amazon.com AMZN $300 4/16/08 Varsity Group VSTY Follett Group   $4 6/30/08 CNET CNET CBS CBS $1,800 8/6/08 Hostopia H.TO Deluxe DLX $124 10/15/08 Greenfields Online SRVY Microsoft MSFT $486 10/30/08 Napster NAPS Best Buy BBY $121

For a complete list of public Internet M&A deals as well as some private deals