Five Buys for the Internet's New Day

This column was originally published on RealMoney on July 19 at 1:33 p.m. EDT.

News Corp.'s(NWS Quote) deal to buy Intermix Media(MIX Quote) for $540 million marks, in my view, a real sign that the Internet is entering yet another new chapter in its already multifaceted existence.

For the past decade, News Corp. has been the most disciplined of the major media companies, as it has avoided getting in over its head and buying into the hype of the Internet. Like a lot of its peers, the company dabbled in the sector in the mid-'90s, spending millions on developing Delphi, an Internet service provider. What is Delphi? That's the point.

News Corp. quickly shuttered the effort when it saw Delphi did not have the profit margins it would have hoped for. And the company never made the costly mistakes of companies such as Time Warner(TWX Quote), with its ill-fated Pathfinder and then AOL, Disney(DIS Quote), with the disastrous go.com portal, or General Electric(GE Quote), with Xoom.com and the NBCi tracking stock.

But it's different this time. The New York Times Co.(NYT Quote) bought About.com for $410 million, EW Scripps(SSP Quote) is buying Shopzilla for $525 million, and Dow Jones(DJ Quote) bought MarketWatch for $500 million.

It's clear that the media players that pride themselves on their cash flows are seeing real cash-flow possibilities in the more speculative Internet content players. In the first of a three-part series on Internet plays, I offer four acquisition candidates below, and one monster Internet name that's a buy here.

1. Miva(MIVA Quote), which I've written about twice, most recently here, provides a search engine ad network for its clients (sort of a search-engine version of DoubleClick) as well as private-label search solutions for Web sites. This is a solid play. Here are the fundamentals: $179 million market cap, $50 million in cash with little debt and $18 million in cash from operations over the past 12 months.

2. Tom Online(TOMO Quote) is a company to watch because, let's face it, even if the Chinese stock market is in line for an Asia-1997-style crash, that is not going to slow down the rising mobile-phone usage in China. Games, music, messaging and ultimately videos make this bullish case. (Note also its recent distribution deal with Warner Bros.) Revenue was up to $122 million in 2004 from $30 million in 2002. Income has climbed steadily, from $5 million in 2002 to $32 million in 2003 to $58 million in 2004. The company has $76 million in cash and no debt. At $39 million in cash flow from operations, Tom Online is trading at a multiple of enterprise value over cash flows of about 14, and that doesn't count the probable growth.

3. Greenfield Online(SRVY Quote) knows the Internet offers the best medium for conducting customer surveys, and the numbers behind this company demonstrate that. Greenfield has $81 million in cash, no debt and a $330 million market cap. Revenue reached $44 million in 2004, up from $25 million and $14 million in 2003 and 2003, respectively. Its first-quarter operating income was $2.5 million, which was up from $400,000 the year before. The stock has been in drift mode lately and is down from a high of $20 four months ago.