Tear down those walls, Time Warner (TWX) and Ziff-Davis (ZD) ! Two forward-looking companies, same day, reached the same conclusion: The only way to realize the value of their Internet holdings is to get rid of their non-Net holdings!
No one is buzzing about these two companies' decisions as a trend ... yet. But they will. Because what it says is that the "fad" of Net valuations is not going away. People want to invest in and give capital to companies that are Net-savvy with no baggage. They don't want to invest in hybrids or companies that are somewhat committed to the Web.
By getting rid of the Time Warner stores, Gerald Levin is saying, "Look, this Net business is going to put out of business traditional high-end merchandising with its expensive rents and expensive help. We have to get out of it before it is worth nothing."
ZD is taking a more radical step. It wants to leave its core magazine competence because it knows that magazines are a loser. Interestingly, there seems to be no Old Guard contingent at ZD who is willing to stand in the way of the New World. Can you imagine this kind of discussion at
or even, shudder, the
portion of Time Warner?
Not now. Not yet.
I know it will happen. They know it, too. The only reason why it hasn't happened yet is because these old businesses generate enough cash that the managements can't sacrifice them. But when that cash flow gets crimped by rising coated freesheet and delivery costs, as well as a lowered rate base from fewer readers, you will see this kind of thinking repeated everywhere. If it doesn't, then I have misjudged the direction of
and a host of other companies that are bent on destroying the profitability of traditional print and bricks and mortar. (It's no longer just me anymore!)
Unfortunately, I don't think it will be that successful because, as I never tire of saying, the Internet is a mindset as well as a business model. Two weeks ago, when the
rolled out its ad campaign featuring some guy sticking his head in a bucket -- I don't know, beats the heck out of me -- I emailed my favorite writer there. I asked him if this campaign signaled the beginning of more interactivity among the people who put out the
and the people who read the
Still haven't gotten a response.
James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. At time of publication, his fund was long Cisco, Lucent, Intel and Hewlett-Packard. His fund often buys and sells securities that are the subject of his columns, both before and after the columns are published, and the positions that his fund takes may change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Cramer's writings provide insights into the dynamics of money management and are not a solicitation for transactions. While he cannot provide investment advice or recommendations, he invites you to comment on his column at