Getty Images Inc. (NYSE: GYI) is one of the few stocks up considerably today, and its business wasn’t likely going to be helped all that much or hurt that much based upon the Fed’s interest rate actions. After a New York Times report, the stock photo and digital media company did confirm in a press release that it has hired Goldman Sachs as financial advisor to help explore strategic alternatives to enhance shareholder value.
- There is just one small problem: it may find that no one is willing to acquire the company even with its valuations trading at what will seem incredibly low.
We noted for our Special Situation Investing Newsletter subscribers back in May 2007 (See Full Report; now off embargo as position was closed out) when shares were around $50.00 that the company was going to fall victim to what was effectively an industry segment de-merger that the company just couldn’t prevent. It isn’t that Getty will die entirely. It does have some key advantages when it comes to sporting event photos other media from other live events and that is where the company’s value and future lies. But the problem is that even though it has tried to adopt a royalty-free model for certain aspects of its digital imaging business, it cannot just keep acquiring new age digital media companies. After we noted for clients to take profits on Getty Images we noted that it would be under review for the possibility that ultimately it may want to or need to seek a buyer. The problem we had is that while it looked like a great value stock, we noted that it may just be another value-trap. It did make some great acquisitions to stave off up-start and more nimble digital competitors, but there is potentially no end in sight for the competition in this space.
If anyone is unsure about the value of having a digital stock photo business, go refer back to our coverage of the post-merger fallout in Jupitermedia (NASDAQ: JUPM) when Getty was supposedly going to buy it. Opening up a digital stock photo business can be done by anyone. We have previously noted how we thought the entire business model could be wiki’d and duplicated for $20,000 or less, although an industry contact noted it could be done for a small fraction of that.
Someone may buy Getty in the end. They just better make sure all the sporting events and live concert and other live event exclusive coverage contracts are locked in place for many many years. Otherwise they are just buying a business whose model is being wiki’d away chiseled away at every hour.
Getty Images shares are up some 13% today to $24.95 and its 52-week trading range is $21.80 to $57.28. Reports out yesterday did put the potential sale at $1.5 Billion, and after the rally today its shares have a market cap of $1.49 Billion. It will post earnings on Thursday, January 31, 2008.
Jon C. Ogg
January 22, 2008
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