Turning Into a Monster of a Competitor

From Barron's | 9/21/09 | By ROBIN GOLDWYN BLUMENTHAL

The parent of online job site Monster.com is
ready to reap the fruits of its heavy investments of the past few years
-- and its global expansion.

WHILE THE WORST RECESSION SINCE THE 1930S has pummeled the labor market, Monster Worldwide
, parent of Monster.com, the big online job site, has been spending
heavily to bolster its business. Now, it's positioned to reap the
fruits of its investments.

Over the past three years,
Monster has spent more than $200 million redesigning its Website for
job seekers, expanding globally with the purchase of ChinaHR.com and
buying Trovix, a technology outfit that should help make its services
more appealing to its bread-and-butter clients: staffing companies and
corporate human-resources departments. Next month, it will introduce an
innovative online search tool for employers. And, while it's been doing
all this, the company has been cutting costs -- by 25%, or $164
million, in the first half alone, it says.

Tim Foley for Barron's

Monster will benefit mightily from a new online search tool for employers and an increased presence abroad, where it already gets about 45% of its revenue.

These
changes -- along with investors' hopes for an economic rebound -- have
boosted Monster Worldwide shares (ticker: MWW), above 17. That's nearly
triple their March low, about where they traded a year ago. The stock's
superheated performance makes it iffy in the short term. But a pullback
of 10% or more would offer a nice buying opportunity for long-term
investors.

INDEED, OVER THE NEXT FEW YEARS, Monster will benefit mightily
from its increased presence abroad, where it already gets about 45% of
its annual revenue of $1.3 billion, and which was growing at a near 18%
annual clip last year before the global markets swooned.

Monster lost 10 cents a
share for the first half, but should move back into the black in the
second. For the year, it's likely to make 5 cents a share. And when the
economy -- and employment opportunities -- rebound, it should be able
to supersize its profits.

Sal Iannuzzi, the former
Symbol Technologies chief who became Monster's CEO in 2007, says that
it isn't "out of the realm of reason" that earnings could reach 40 to
45 cents a share per quarter when the economy returns to a normal
level. Based on the recent stock price, that would mean that the shares
could be trading at a price/earnings multiple below 11, versus its
historical average of 25. Moreover, the stock currently fetches 1.91
times per-share sales, about a third of its 10-year average multiple of
5.6, notes Tobey Sommer, of SunTrust Robinson Humphreys, one of the few
analysts with a Buy rating on Monster. His 12-month price target is $23.

David Katz, chief investment
officer of Matrix Asset Advisors in New York, has been buying the
shares. "We're very confident that on a 12-month basis, the stock will
be in the mid-20s," he says. He acknowledges that there's short-term
danger; Monster might fall twice as much as the broad market in a
correction, he says. But, longer-term, he views it as a solid bet.

Already,
there have been some tentative signs of life in the labor market.
Employers in August cut 216,000 jobs -- bad, but well below the awful
numbers seen earlier this year. By Monster's reckoning, online job
postings in August rose 6%, the most since 2005, with the Monster
Employment Index hitting 121. Sommer says that Monster's North American
business, which accounts for 48% of revenue, is closely related to that
index, meaning that it probably went up by a like amount. Last year,
Monster's North American revenue fell about 10%.

Despite a national jobless
rate that hit 9.7% last month, independent research also has shown an
encouraging upturn in the online job market. The Conference Board
reported employer job demand up a seasonally adjusted 5%, or 169,000
jobs last month, compared with July's level. "The August increase was
some very good news," says June Shelp, a Conference Board economist.

Since
April, online job demand has risen by 300,000, with many larger states
showing stable trends, the Conference Board reports. "Advertised
vacancies tend to be a lead to what's happening in employment," notes
Shelp. To be sure, some surveys have shown less rosy prospects for
hiring. But Monster's strong and growing international presence, with
operations in 50 countries, definitely gives it an edge, regardless of
how the true picture turns out.

Iannuzzi says he's seen a
pickup in China, as well as Korea and Western Europe. Monster has also
moved into Latin America, and last year inked a joint venture with News Corp
. (NWSA), Barron's
publisher, in Australia. "We're the only firm out there with
geographical reach," Iannuzzi says, distinguishing it from the other
big players in online recruitment, CareerBuilder and Yahoo! HotJobs.
CareerBuilder is a private company owned by a consortium led by Gannett
(GCI) and Microsoft
(MSFT). HotJobs is run by Yahoo!
(YHOO).

Monster commands about 30%
of the North American online job-search market of about $2.3 billion,
second only to CareerBuilder's 35%, Sommer says, and 20% of the overall
North American market of $5.3 billion, including print advertising, to
CareerBuilder's 23% and HotJobs' 10%.

BUT HAVING RECENTLY REORGANIZED its sales force, and with the
rollout of its employer search tool imminent, Monster could boost its
share. In fact, while the number of online job seekers grew 4% in
August, year-over-year, Monster saw a whopping 66% growth in visitors,
versus CareerBuilder's 38%, according to comScore Media Metrix.

Sue Feldman, an analyst at
Interactive Data Corp., calls Monster's new search tool "a huge leap
forward." Using advanced match technology makes it easier to link
suitable candidates with appropriate jobs, even if job seekers and
employers use different terms to describe their goals.

The Bottom Line

Monster shares have
almost tripled from their 2009 low; they are about where they traded a
year ago. A pullback would offer a buying opportunity in the stock
which looks like a good long-term bet.

Monster also should benefit
from a recession-inspired decrease in the size of corporate
human-resource departments that is unlikely to reverse when the good
times return. This offers more opportunity to online job sites. In the
second quarter, Monster became the primary provider of online
recruitment services for Microsoft, and signed a big insurance
wholesaler, Burns & Wilcox, to a multiyear deal.

Monster is focusing on new
technology to leverage its online presence. It has also moved into job
sites for workers such as police and teachers, aiming to stem the
competition from niche players and social-networking sites. And the
company has a solid balance sheet, with $236 million, or nearly $2 a
share, in cash and almost no long-term debt.

All in all, Monster looks like an idea that will work for long-term investors.

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