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Will Blinkx (BLNX) be the UK’s answer to Google?

Important: What follows is not a recommendation to buy or sell Blinkx. I’m a private investor, storing and sharing notes. Read my disclaimer.

Name: Blinkx   Ticker: BLNX
Listed in: London (AIM)   Business: Technology
More information: Digital Look / Google Finance
Official Site: Blinkx

Key numbers for Blinkx (10/11/08)

Share price: 19.25p
Market cap: £53.4 million
Net cash: Approximately $32 million
High/low (12 months): 35.75p / 14.75p
P/E (Latest/Forecast): n/a  / n/a (loss making)
PEG (Latest/Forecast): n/a / n/a (loss making)
Yield: 0%/0%

Blinkx is a search engine for video content, which uses speech recognition technology to index videos. It was spun off by Autonomy, the FTSE 100 search specialist, in May 2007, and was listed on the FTSE AIM market priced at 45p to go. It ended the day up at 63p.

Since then it’s risen and fallen (mainly fallen) and is trading on today’s latest Interim Results as I type at 19.25p.

While the price has gone up and down, Blinkx’s traffic and revenues are only going higher. Today’s results for the six months to the end of September 2008 highlight:

  • Strong revenue growth up 115% to $6.4m from first half FY08
  • Top and bottom line performance ahead of analyst consensus
  • Gross profits up 106% to $4.5m from first half FY08
  • Unique visitors up 106% year on year to 64 million and page views up 267% year on year to 668 million in September 2008 (source: comScore)
  • Daily Video Search run rate of over 7,000,000 per day in September 2008
  • Content hours increased 78% year on year, from 18.5 million to 32 million
  • 70 new content partners added, bringing total to over 420 media organizations, including Getty Images, Time Inc. and CBS
  • Addition of top-tier syndication partners, including ITN, MSN UK and Rambler

I’ve not looked closely at how Blinkx calculates gross profits from my quick perusal of its results, though, since we’re soon told it amounts to a $3.3 loss for the period, or a loss per share of 1.17 cents, which is nearly double the operating loss per share from last year, stripping out the IPO costs.

Blinkx burned through $4.7 million of cash during the period, double the cash burn rate last year (excluding IPO costs), so that strong revenue growth of 115% has been bought at quite a price.

Is Blinkx a return to the dotcom era?

The company still has $32 million in cash, so it’s no going to go broke any time soon, but having lived through the dotcom period, I’m automatically nervous when a loss-making company grows revenues by $4million by spending about the same out of cash.

At some point, a company has to make a proft – and the narrowing EPS loss suggests that may be on the way for Blinkx, if you dare take the risk.

Video is the way the Web is going, and I’d love to buy the UK’s Google, if that’s what Blinkx is. However I have several qualms, besides the cash burn:

  1. If Blinkx were really the Google of video, why hasn’t Google bought it? £53 million is loose change for Google.
  2. Blinkx has a huge list of commercial partners, including the likes of Getty Images and Time. But if it’s got those now, where are the future revenues coming from?
  3. Google makes its money from delivering advertising alongside organic search for websites. Is someone searching for video going to be interested in rival content? And will the owners of content pay to have someone watch their content instead? I don’t see much of a cross over.
  4. Autonomy, Blinkx’s original parent, makes buckets of cash from deep search, but that’s primarily by mining corporate data. Again, I don’t see a crossover with Blinkx.

I’ve certainly not taken a deep look at Blinkx and technology companies are notoriously tricky to call. But for now I won’t be rushing to add Blinkx to my portfolio, though I wish this UK company all the best.

Note: Monevator takes no responsibility for the accuracy of this post. Read my disclaimer.

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{ 1 comment… add one }
  • 1 SJ2021 November 18, 2008, 9:52 pm

    further to my early comment [barclays] this is exactly the sort of share to avoid right now. okay it has cash which is good but the momentum is awful. pharma, utilities (especially with deflation) and some oversold miners are where im looking right now.

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