Are we really back in the unreal world of the dotcom bubble?
To judge by Yell, the directories group, the answer - heaven help us - is yes. Ahead of an investor day on Thursday, the debt-laden group has announced a strategic alliance with Microsoft relating to "online advertising and business solutions" to help small and medium sized businesses "reach and engage consumers."
This follows news on Monday that it has paying $18m in cash for ecommerce business Znode.
And as in the dotcom boom, the words "Microsoft" and "ecommerce" are enough to send Yell's shares flying, currently up 1.26p at 10.75p, a 13% increase. But Alan Howard at Canaccord Genuity issued a note of caution:
The news momentum is clearly building ahead of this Thursday's investor day.
However, we remind investors that the group's business remains in a difficult position. It is exposed to some of the worst performing mature economies in the world (UK, US, Spain), as well as a classified advertising business in long-term decline, with no bottom yet in sight (the company is still declining at double-digit rates). On top of that, the group's £2.8bn debt makes its balance sheet highly fragile.
Until we see some firm evidence of underlying improvement in the group's financial performance, we maintain our hold recommendation and 7p target price.
