On the other hand Rediff’s (Nasdaq: REDF) latest news seems to be more material.  But once again has the price run up a little too much?  Rediff could have some legal issues down the road with the copyrighted content uploaded to Rediff iShare. 

—————————————

Following is an excerpt from the note Sameet Sinha, Senior Equity Research Analyst, at Kaufman Bros. (KBRO), sent to clients:

ANNOUNCES ALLIANCE WITH MICROSOFT FOR EDUCATION AND ISP SERVICES

• Sify’s cyber cafes to offer Microsoft education programs. Sify’s iWay cyber cafes is expected to promote and host certification programs for Microsoft products, starting with MS Office. The coursework will be offered online and hence has little incremental associated costs. We believe that Sify will primarily benefit from the browsing fees associated with online education and the company was not able to confirm if there is a revenue share arrangement for the course fee as well.
• Sify’s ISP services to be bundled with Microsoft’s IQ PC. Earlier this year, Microsoft launched its ambitious Unlimited Potential campaign to increase penetration of computer awareness and ownership in less developed countries. As part of this initiative it also introduced a $500 PC (called IQ PC), which ships with a suite of Microsoft’s productivity tools and some education programs as well. The marketing is being tested this month in some cities and will  be extended to the entire country by year-end. Sify’s ISP services will be bundled with this PC, offering consumers 100 free hours of online access, with the option of signing up to a paid service at the end. We are not sure if this bundling will be in the form of a set-up disc in the box or an icon on the desktop, or if this is an exclusive relationship. While this deal has much higher revenue generating potential than the education business, it is totally dependent on Microsoft’s initiatives, which are untested at this point. For example, we believe the $500 price point for PCs is still expensive for the average household in India and will not lead to a sudden increase in PC penetration in the country.
• This is part of a larger game plan for Microsoft. SIFY is now a part of Microsoft’s larger game plan of bridging the digital divide in countries like India. The growth of IT penetration in India is slow and a number of initiatives are in place to speed this up. We feel investors need to understand that this will be a slow path and not to expect dramatic changes in Sify’s fortunes, due to this announcement.
• SIFY has had its own issues. We like Sify as a play on the enterprise services, outsourcing and Internet penetration trends in India. However, the company has had its own set of problems over the last year. The new management team under Chairman and CEO Raju Vegesna is working to clean up the operation and financial structure at the firm, which we anticipate will affect top-line growth for at least another quarter. Once the systems are in place, we believe that management will be aggressive in marketing its various businesses and we could start seeing the benefits toward the end of the year.

• Our price target remains $8. This utilizes a 10-year forecast of the company’s estimated unlevered free cash flow discounted at the cost of equity of 13.4%, down from 13.6%, due to a lower risk-free rate (10-year note) in our CAPM model.

• Bottom line. We would caution investors against increasing expectations for SIFY, due to this partnership. We like the SIFY story long term, due to its exposure to the enterprise services and Internet market in India, but near-term issues at the company keep us on the sidelines for now.

————————————–

* No position in SIFY, REDF or MSFT for me.

Share This

Let look at the highlights from the third quarter (ended December 31, 2006): 

• 3Q revenues totaled $7.75 million – 54% YoY
• Indian Online (Portals) revenue grew to $5.69 million – 80% YoY
• US Publishing revenue grew to $2.06 million - 11% YoY
• Gross margins increased to 80% from 70% a year ago.
• Net Income came in at $1.51 million, or 5.20 cents per ADS, compared to a net income of $0.31 million, or 1.19 cents per ADS a year ago. 
• Registered user grew by 23% YoY to 50.66 million

The company also announced some new initiatives:

• Rediff Fare Search
• Job Search
• Product Search
• Image Search
• Launched a mobile client of its Instant Messenger Rediff Bol.
• Rediff also saw a surge in their Classifieds Listing service which they heavily advertised. 

Rediff has done a good job of launching their search products which searches across multiple sites and provides unbiased and vendor neutral results for jobs, airfare and products.  You have to appreciate Rediff’s management team when you compare the portal divisions of Rediff and Sify.  Rediff continues to be the leading domestic portal in India.  According to Alexa, its the 5th most popular site in India behind Yahoo, Orkut, Google India and Google US.  Their main competitor Indiatimes.com and Sify.com (Nasdaq: SIFY) come in at 13th and 21st respectively. 

Rediff has a lot to gain with more non-English speakers coming online in the near future with their strong local brandname.  It is widely considered that most of the English speakers in India are already online.  The next wave will include people who speak one of the many regional languages.   This is exactly the reason why Rediff bought a minority stake in Bangalore-based software company Tachyon Technologies.  Tachyon Technologies’ Quillpad software lets people use the English alphabet to type words in other languages phonetically and converts the text into the other languages’ characters.

I recently shorted Rediff successfully but got out just yesterday since I didn’t want hold during the earnings.  It turned out to be a good call and I will look into shorting the stock again if its goes over $20.  Rediff is a very good company with a great future but Internet and Broadband penetration in India hasn’t been that great.  There is plenty of time to go long on Rediff and until then its a good trading stock. 

* I don’t have a position in REDF. 

Share This

ContentSutra:  Rediff (Nasdaq: REDF) will be launching an online game this quarter according to its Founder and CEO, Ajit Balakrishnan. They are working on this initiative in-house instead of making acquisitions. Online gaming hasn’t really taken off in Indian and all accounts indicate that Sify’s (Nasdaq: SIFY) entry into online gaming has been subpar at best. However, this seems like the perfect time to get in before its too late.

By 2010, India’s online gaming market will exceed $200 million. (Source: kotaku.com)

“India in 2006 is comparable to China in 2001, when the country’s online gaming culture started to take shape. Within the next ten years, India could emerge as one of the top online markets in Asia, right alongside China, Korea and Taiwan” (kotaku.com)

Rediff.com is India’s number one portal and I wouldn’t bet against Rediff being successful in online gaming.

Share This

IndianTelevision: World cup turned out to be coupe for online portals such as Rediff (Nasdaq: REDF) and Sify (Nasdaq: SIFY).

Thousands of clips of World Cup football related content were viewed on Sify’s broadband portal Sify Max in the first two weeks of the tournament. The most watched clip was the Brazil v/s France match on July 2nd, which was viewed 25,000 times. This is not surprising as most of the Indian football fans support Brazil. Sify added a video featuring the wives/girlfriends of star football players which turned out to be very popular.

India’s leading portal Rediff too cashed in on the football frenzy, with increased page views resulting in more ad inventory which in turn resulted in better revenue. Football brought a wide range of advertisers like Ranbaxy, Maruti Swift, Gillette, Microsoft and Apollo Tyres for the Indian portals.

Share This

Background: Rediff.com India Limited (Nasdaq: REDF) is India’s leading online portal. Rediff has had a rough time since reaching its all time high of 33.75 in February 2006. Jim Cramer recommending Rediff on his Mad Money show was the primary reason the stock made it into the 30’s. The stock moved up so quick from high teens to low 30’s that Cramer called on his loyal followers to pull the trigger and sell the stock. Rediff was seen as the perfect example of how Cramer can affect the markets with his picks. He called on Rediff as India’s Google which is totally wrong as you will find out later in this article. Anyways, the stock has been declining ever since although the tough market here and in India played a contributing factor. The stock is currently trading at $13.62 with a market cap of about $367 million.

The company basically has two business units:

- India Online - Rediff.com Portal – Revenues for quarter ending March 31st – US$3.57 million
- US publishing – It publishes a newspaper for the Indian community in the United States which has also helped it become the portal of choice for Non-Resident Indians (NRI’s) living abroad – Revenues for quarter ending March 31st – US$1.54 million.

Rediff is considered a good way to play the Indian Internet growth and is profitable as well but calling it the Google of India is disrespecting Google.

So should you buy Rediff?

I don’t consider Rediff as a long term holding. It’s a good stock for traders and with the growth in Indian internet users to surpass 100 million in the next couple of years Rediff should be a huge beneficiary. The company should grow by default.

Here’s what I think:

1. Rediff.com doesn’t offer anything unique to Indian internet users that Sify, Yahoo! India, MSN India and IndiaTimes.com doesn’t offer.

2. If you ask most Indian Internet users they would rather use email service provided by Google or Yahoo over Rediff as well as Sify.

3. Most Indian internet users are English speaking and are more likely to use Yahoo and Google for search and email.

4. Has Rediff been innovative as of late? What is their near term and long term strategy?

Here are some things to look at:

- Rediff unlike its direct Indian competitors Sify.com and IndiaTimes.com doesn’t have a broadband portal. Sify has taken a lead in this with SifyMax.
- Sify, a competitor, recently launched localized portals for a couple of Indian cities (Bangalorelive.in and MumbaiLive.in), with more on the way. Is Rediff doing anything about this? Since, Indian portals can’t compete with Yahoo, Google and MSN on services they have to invest in content and Sify is doing that with its broadband portal and localized city specific portals. What is Rediff’s strategy here?
- Sify recently bought a US based travel portal to take advantage of the booming travel sector. MSN India also formed a partnership with a travel portal. Rediff does have a travel search tool but no official relationship with a travel portal that I know about.

5. The good thing is that the company does have cash and cash equivalents totaling approximately US$53 million as of March 31, 2006. This is enough cash to make strategic acquisitions and to invest in new products and services. The company needs to focus on content and utilize its strong name brand.

Conclusion: You can’t go wrong with Rediff as a trader. The company should benefit from the sheer number of internet users that are expected to surpass 100 million in the next couple of years. I am just not sold on the company long term. It’s hard to keep internet users who mainly come to your site for content without investing in content.

Share This

DNAIndia: According to an article in DNAIndia, Indian portals such as Sify and Rediff could see a advertising revenue upside of 15% due to the world cup craze.

I checked out both Rediff’s (Nasdaq: REDF) and Sify’s (Nasdaq: SIFY) world cup sites and although they both look good, I have to give a slight edge to Rediff. I am not sure if Sifymax will be able to show highlights but if they can it will give them an edge.

Share This

NDTV: Following are the highlights from Rediff.com Indian Ltd. (NASDAQ: REDF) fourth quarter and year end March 31st, 2006 earnings report:

– Revenues for the quarter ended March 31, 2006 were US$5.11 million; an increase of 48% over revenues from the quarter ended March 31, 2005.
– India Online revenues for the quarter grew by 69% to US$3.57 million over revenues from the quarter ended March 31, 2005.
– US Publishing revenues for the quarter grew by 14% to US$1.54 million over revenues from the quarter ended March 31, 2005.
– Gross Margins increased to 76% for the quarter, compared to 62% for the quarter ended March 31, 2005.
– Net income for quarter was US$0.53 million or 1.96cents per ADS, compared to a net loss of US$0.24 million or 0.92 cents per ADS for the quarter ended March 31, 2005.
– Revenues for the fiscal year ended March 31, 2006 grew by 48% to US$18.70 million compared to revenues during the prior fiscal year.
– India Online revenues for the fiscal year ended March 31, 2006 grew by 86% to US$12.17 million compared to India Online revenues during the prior fiscal year.
– US Publishing revenues for the fiscal year ended March 31, 2006 grew by 8% to US$6.53 million compared to US Publishing revenues during the prior fiscal year.
– Net income for the fiscal year ended March 31, 2006 was US$1.21 million, or 4.50 cents per ADS, compared to a net loss of US$1.43 million, or 5.56 cents per ADS, for the prior fiscal year.
– Registered users as of March 31, 2006 numbered 43.05 million, a 20% increase compared to the number of registered users as of March 31, 2005
– The number of advertisers on the Company’s site as of the quarter ended March 31, 2006 totaled 156 brands, up 41% on a year-on-year basis.
– Increase in average CPM price realization for banner advertising in the quarter ended March 31, 2006. Six industry categories accounted for 79% of advertising on Rediff during the quarter ended March 31, 2006: consumer financial services, employment, education, matrimonial, FMCG and IT.
– The top 10 advertisers for the quarter ended March 31, 2006 accounted for 49% of India Online advertising revenue compared to 59% % during the same quarter last year.
– Steady increase in the share of performance based advertising in the quarter ended March 31, 2006.
– Cash and cash equivalents totaled approximately US$53 million as of March 31, 2006.

Share This

Yahoo Inc. (NASDAQ: YHOO) made big news in India last week as CEO Terry Semel was in India looking to make acquisitions. According to reports, Yahoo is looking at major acquisitions/and has been looking at a few companies. Yahoo is bullish on the Indian Internet sector and probably feels like this would be the right time to make an entry. India will have the highest number of Internet users after China and US in about 5 years.

Yahoo! India is already a popular portal in India and competes with MSN.com, Sify.com, Rediff.com and IndiaTimes.com. One thing to consider is that Indian Internet users almost all speak English unlike their Chinese counterparts and are more likely to visit Yahoo and Google for search and Email. Therefore, Indian portals benefit by providing news, sports scores, shopping, entertainment among other things. They can never compete with Google and Yahoo or MSN in search. Also, Yahoo has an established brand name in India that it can utilize and grow.

Let’s analyze the potential targets (not in any particluar order):

1. Rediff.com (Rediff India Private Ltd. (NASDAQ: REDF) – The number one portal in India and an established brand name. Rediff is a pure play portal and doesn’t bring anything new for Yahoo. I just don’t see any reason for Yahoo to go after Rediff.

2. Sify.com (Sify Ltd. (NASDAQ: SIFY) – Sify is a diversified internet company in India with a strong brand (although not as big as Rediff). They have a foothold in pretty much everything to do with Internet in India.
- Portals - Portal business is much like Rediff and Yahoo but has beaten everyone in India with a broadband portal called Sifymax.com and by starting local portals for various Indian cities such as Bangalore. (Bangalorelive.in). The broadband portal and local city portal could be appealing to Yahoo.
- ISP - India’s largest private Internet service provider with over 183,000 broadband subscribers. Think about Yahoo using this just as they sell Yahoo! SBC DSL service in the US. Although, Sify doesn’t own last mile connectivity, the coming of WiMax will help them. 183,000 broadband subscribers won’t sound like a lot to American readers but consider that the broadband penetration in India is miniscule.
- Cybercafes- Probably the most enticing part of the business for someone like Yahoo. Sify has 3,300 internet cafes (34 owned and rest franchised) in 153 cities and towns throughout India. Two new cafes are added each day. Think about all these cafes having the Yahoo brand instead of Sify. VOIP is also huge in these cybercafe’s and brings in a considerable amount of revenues for Sify. In India, majority of the people access internet outside their home, usually cybercafe’s, schools and offices.
- Gaming- Sify’s Iway cyber cafes are also used for Gaming but Sify also has specialized gaming sites called Sify Gamedromes. Sify is also into MMORPG gaming. Yahoo still hasn’t gotten into this arena and could benefit from this very popular form of gaming.
- Enterprise Services- Dominates the Indian VPN market, provides hosting services, provides remote infrastructure management which is going to be huge just like software outsourcing and provides security services among a magnitude of Enterprise services. Not sure how this will benefit Yahoo but this is one area that makes money for Sify.

Also, George Zacharias, former COO/CFO of Sify left Sify to join Yahoo! India recently. Yahoo obviously has more than enough information on Sify.

3. Indiatimes.com – Privately owned but I have been hearing they will be going public soon. Don’t have much info on them but is a very popular portal in India. I don’t think they offer anything else except portal. Part of the strong Times of India group I believe. I don’t see any benefit to Yahoo.

4. Other Indian sites (Source: ContentSutra.com) – I could also see Yahoo going after a one of the sites listed below. However, these won’t be considered a major acquisition. In ecommerce Ebay already bought Bazee.com and has a leadership position in that area.

� Yatra Online – Travel bookings
� Cleartrip.com – Travel bookings
� Travelguru – Travel bookings
� Naukri.com – Job search site
� Shaadi – Matchmaking site
� Jobstreet- Job search site.
� Makemytrip – Travel bookings

Did I miss anything? Let me know?

Share This

Anyways, you can compare the two stocks and although long term they should both payoff I wouldn’t touch Redf at these levels. Sify is still way undervalued while Rediff is way overvalued. I wouldn’t mind Rediff in the teens for a long term investment. Although, in a growing market like India, Rediff at these levels wouldn’t hurt either if you are thinking really long term.

So to conclude, Sify Ltd. is a Strong buy at these levels and Rediff is a buy in the teens.

Your thoughts? No registration required for comments.

Share This