February 23, 2000

Multex.com, Inc., a ubiquitous distributor of Wall Street research reports, is striking lots of alliances to cross-market its content through other Internet sites. But Multex.com might get the biggest bang for its buck from the purchase of Market Guide, a low-profile financial data provider tucked away in Long Island.

On Sept. 23, Multex.com acquired Market Guide, a supplier of fundamental and analytical financial data on more than 12,000 U.S. public companies, which also has distribution agreements with more than 135 online vendors, financial Web sites and portals ranging from Yahoo and AOL to CBS MarketWatch as well as institutional services like Bridge, ILX, Track Data and Instinet Analytics.

The reason for the acquisition is simple, says Homi Byramji, president and CEO of Market Guide based in Lake Success, N.Y. “All of Multex’s customers are potential Market Guide customers and visa versa,” contends Byramji.

With the integration of the two companies completed, they plan to roll out new products that leverage Multex.com’s technology and Market Guide’s data. One example is Stock Screen—a sophisticated screening application that was in beta test with customers in January. “The great thing about that is that the same software can work with the same data sets,” explains Byramji, who adds they can develop a more advanced paid-version for a subscription-based market.

According to Pawan Malhotra, executive director of CIBC World Markets, who follows Multex.com’s stock, Market Guide’s proprietary content enhances Multex.com’s position against larger competitors, like Thomson Financial’s First Call. “It’s a unique content base especially on the institutional side, and it’s been used through various sources like FactSet, but Market Guide has really been providing that content on the retail side to sites like AOL and Yahoo,” he notes.

However, the perception that Multex.com was competing against First Call, a much bigger player, hurt the stock price, he says. Since going public at $14 a share last March, Multex.com’s shares (MLTX) have ranged from a high of 70 1/2 to a low of 12 9/16, but had recently rebounded to the mid-30s and high 20s.

One reason that Multex.com’s stock price took a hit last summer, “was concern whether they could really build a critical mass of suppliers as well as users of that content which they’ve been able to do.” At the same time, one or more analysts that covered the Multex.com stock changed firms, so the company didn’t have the support of institutional research to understand the story, he says.

But, Malhotra, who began covering Multex.com in January, says that the firm’s performance remained strong throughout the period.

On Jan. 27, Multex.com said revenues for the fourth quarter ending Dec. 31, 1999 had doubled to $13.5 million from $6.3 million in the fourth quarter of 1998. In a statement, Multex chairman and CEO Isaak Karaev, attributed the strong results to the dramatic increase in Multex Investor membership (surpassing one million registered users), growth in Multex Express sites (private intranets), and increased sales, promotion and cross marketing synergies from the integration of Market Guide.

However, due to heavier spending on advertising and expansion of marketing and sales staff and ongoing technology development, Multex.com also reported a larger net loss (excluding acquisition expenses of $106,000) for the quarter of $8.4 million, compared to a net loss of $2.9 million for the quarter ended Dec. 31, 1998.

Based on Malhotra’s estimates, Multex won’t be profitable until 2001— “that’s the crossover year,” he says. But in January, upon restarting coverage of the stock, Malhotra, put out a $54 target price for the stock over the next 12 months.

“I think you’re going to continue to see Multex hit on all cylinders,” he says, continuing to stand out on its institutional research, helping brokerage houses and mutual funds move online for customers. I think you’ll see the retail side start to kick in as the company really leverages the content that flows over its network into the retail side.”

Malhotra also expects Multex to expand its product line and its research, internationally, moving “pretty heavily” into Europe and Asia, where it’s already started to acquire content.

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Ivy is Editor-at-Large for Advanced Trading and Wall Street & Technology. Ivy is responsible for writing in-depth feature articles, daily blogs and news articles with a focus on automated trading in ...