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Tomorrows Tax Day, Don't Pay, I'm Certain

Mon, 14 Apr 2008 11:50:00 -0400
“Certainty? In this world nothing is certain but death and taxes.” Except for not patenting electricity Benjamin Franklin is usually correct.

In regards to the life cycle of your web hosting company his timing is impeccable.

Your company should do everything possible not to pay taxes. You can either give it to the government, great benefit there, or grow your business and hence the economy. Hire more employees (let them pay taxes), spend money on capital equipment and that whole channel line pays taxes. But remember you don’t want your company to pay taxes. Not on April 15th.

Smart and profitable industrialists, hopefully like you, avoid taxes. That is one of the commanding reasons for acquiring a business. Most web host firms have lousy balance sheets. They have depreciated the assets and have nothing to shield profits, they pay taxes.

I always find it sort of magical that you can acquire an asset (buy a company) that was fully depreciated yesterday, put it on your balance sheet today (stepping up the assets as accounts say) and voila! you have a complete new depreciation schedule protecting your cash. Sort of like asparagus cropping up in the spring, where did that come from?

So you say…“I am profitable but don’t have any money to make an acquisition Tom”. Even a better reason to take out a government loan. That is exactly what not paying taxes is, a differed no interest loan from the government. And if you screw up sort of risk free.

Now Ben was correct…nothing is certain but death and taxes. In your case the death of your company. Don’t frown, this is just the end of the investment period…maybe the buyer of your company will keep the name, who cares?…your out. Now you want to pay a lot of taxes, big time taxes. You have taken those government loans and parlayed them into your success. As Franklin said taxes were certain, he just did not state when.

More about Tom:

New Commerce Communications

E-Mail Tom Direct

Tucows - Has a deferred problem

Tue, 12 Feb 2008 11:49:00 -0400

Tucows (AMEX:TCX) has lost 50% of its market value since July 2007. Yes it has dropped from $1.26 to $0.63 a share, a 50% drop over the last six months.

The Company just released it’s year end financial statement, so now is a good time for a quick review of the basics:

- Annual revenues were $74.6 M vs. $65 M for the previous year – up 14%, nothing wrong there.
- Net Income $2.6 M vs. $2.1 M – up 24% -- direction is good.
- EBITDA $8.7 M vs. $5.8 M – up 50% -- something to write home about.

Tucows has a market cap of $46.5 million. The overall value could be stated as:

- 5.3X EBITDA
- .62X trailing revenues.
- PE Ratio 18.68

So why is Tucows trading so low? Why has it dropped a whopping 50%? As a high tech firm it deserves at least a 40 P/E ratio. It should be trading at a 1X revenue range, frankly more. That would take it back the July stock price.

The problem is the Tucows balance sheet. The Company has $80 million in liabilities. How is Tucows going to make it? Given current EBITDA one could take almost 10 years to pay it back, not including interest. The game is over; tank the deal, time to trade out.

WRONG WRONG WRONG ---- Tucows needs more liabilities, I think liabilities should go through the roof. They should be the master of liabilities; the street just doesn’t get it.

Financially speaking there are not many firms like Tucows. They sell millions of little things, sort of like Coca Cola. However those little things are domain names, selling for lets say $12. Since they are paid “up front” for a specific period, usually one year, the revenues for these are recognized at $1 per month, not the $12 when the transaction occurred. Sort of like cash vs. accrual accounting.

The bulk of the liabilities time out in one year, when hopefully, they start all over again. Look at it as millions of itsy bitsy revolving loans.

Of the $80 million in liabilities, $50 million (63%) is tied to deferred revenues resulting from domain registration sales. Domain name registrations account for 73% of revenues.

Usually I hate deferred revenues (which is a topic for a separate writing). However for Tucows it is the business model.

I might be naive, but I don't think many people drive up to Tucows and say..."I stopped using my domain name...I want my $3 back". I have a hard time rationalizing how GAAP, in the practical world, should apply here.

Tucows – Has a deferred problem. One the street does not understand, and one I think is holding the stock price down.

========== MORE ABOUT TOM ==========

New Commerce Communications

E-Mail Tom Direct

More about Tom:

New Commerce Communications

E-Mail Tom Direct

Hostican hosting is now upgrading their shared hosting plan to offering more storage space and even more hosting features. For the hostican base-host, its now with 600GB storage space and 6500GB monthly bandwidth, and allow to host 2 domain/websites in this account. For the hostican tera-host plan, its now with 1000GB storage space and unmetered monthly bandwidth, and host unlimited domain name. You can use as many bandwidth as you need to.

We checked their prices and one of their packages was with almost

the same price as it was with EartHoster. We went ahead and paid

and received our login details. We just than realized that we have

purchased simply a big hosting account with the possibility to place

many web sites on, but it was not a reseller account and it was also

without WHM panel.

So what’s a web hosting sitebuilder to do? I know you’re out there so please speak up and liberate us from the prospect of buying a bad domain.

Web Hosting - HostMonster Review

Mon, 14 Apr 2008 15:28:02 EDT
HostMonster provides one big web hosting package. This web hosting plan meets hosting needs of individuals as well as business owners. The plan is very affordable. However, you do not lose out on functionality or performance even though the hosting plan is only $6.95 per month.

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Today`s suggestion:

We were hosted on 1and1 for over 2 years. I must say, the first 1.5 year was OK.
No major issue although some downtime from now and then. But the last 6 months
have been a real nightmare. Multiple outages, complete server failures needing
full mailbox restores (4 times), lost e-mails (corrupted new e-mails that could
not be recovered), you name it. We are switching providers ASAP. Two of my users
are currently receiving mail thru a POP server because their Exchange account is
still down (over 2 weeks now). I cannot recommend this hosting provider to
anyone. They have the best rates, but the worst uptime and support so its not
worth it.

Click Here to go to hostican website.

We have tried to write all this about web site design without leaving any margin of doubt lying in you. If there is any margin, do remove it.
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