Where can you buy a company that generated $377 million in cash after expenses in the first 9 months of this year for a total of $14.6 million? Check your local yellow pages.

Though Idearc has not made any announcement regarding bankruptcy, in the last year and half Idearc’s (publisher of the Verizon yp and superpages.com) stock has dropped from $35 to around 10 cents a share. The company has 146 million outstanding shares of stock, which means you could pick up a company that does about $3 billion in revenue with fat margins for just over $14 million. Usage of the yellow pages is still relatively strong at over 12 billion look-ups last year.

So, why would a company that is so cash rich be facing bankruptcy? Well, when Verizon spun it off in 2006 it sent it away with 9 billion dollars in debt. (Which sounds a little shady to me). So, it would seem the logical thing to do now would be to file bankruptcy, pay off the debtors at a few cents on the dollar and reorganize.

But they may cause a whole other problem. In this headline driven world, everyone is going to hear only that the yellow pages is bankrupt. And everyone will think they ran out of money because no one is using it anymore. Then people will think they now NEED to use the internet to get information when making a local purchase decision. Then the yellow pages will be bankrupt for real.

Idearc better think long and hard about the public relations end of any bankruptcy.

If Idearc does file bankruptcy it could void their intellectual property agreement with Verizon.

Under the Intellectual Property Agreement, Verizon Services also agreed not to
grant any licenses to use specified intellectual property to any person who
competes directly with Verizon or Idearc Media. The Intellectual Property
Agreement is terminable by Verizon Services only in the event of Idearc Media’s
bankruptcy, or in an event of default by Idearc Media.

I would not be surprised if they are in negotiations with Verizon right now over this and this may be what’s been keeping them from filing thus far.

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28 Responses to Might Idearc’s Impending Bankruptcy Be The End Of The Yellow Pages?

  1. Ben says:

    In order to “buy” idearc you would have to also buy the debt. This can also been seen as some of it is commercial debt and traded. Having said that the enterprise value is still in the billions. The issue here is that some of that debt is actually owned by Verizon (who generates a significant amount of cash) so the most likely scenario is that they would take the company back over but in order to do so they would have to buy out the other debt holders.

    These companies are generating free cash flow from operations that is significant. However the debt is wieghing them down so they can not invest that cash flow in new opportunities (it also means they don’t pay much on taxes since that debt cost is tax deductable). In today’s debt markets, they can not easily restructure this debt because new debt it too hard to find. Same reason the average american can not get a new home loan to pay off a bad old home loan. So they are stuck with bad debt on these companies unless they file bankruptcy.

  2. Carlton says:

    Ivan Seidenberg, Kathy Harless and all there underlings are a bunch of crooks. What they did to the Information Services unit (yellow pages) of Verizon is criminal. It is kind of amazing that whatever groups who look at these transactions/spinoffs let them still happen. The next disaster that Seidenberg orchestrated will be selling northern new england telco to FairPoint Communications. They will be the next company to go upside down because the higher ups made it sweet for Verizon and a PIG for the future owners. Look at what just happened to the telco and directory business they sold in Hawaii, yup crapped out and went bankrupt….. Is there a pattern here?

  3. Indian Mary says:

    “Then people will think they now NEED to use the internet to get information when making a local purchase decision.”

    That sentence seems like it just stumbled out of 1997. Whether or not the yellow pages proliferate or tank has nothing to do with internet usage in current times. Internet searches are very healthy and its future projects great growth; people already know this and the local advertiser is the one yellow pages pubishers need to fear the most. Mom & Pop Plumbing Contractors and the like, are the most at risk. They have been brainwashed for years that if they don’t sink hundreds or thousands of dollars a month in the print phone book, they would go out of business. Usage is down and the number of books keep increasing. Plus all of the bastard spin-offs. Like the mini companion books, etc.

  4. Curtis10018 says:

    Here in NYC I can’t tell you the last time I even saw a phone book – maybe 2001 or 2002? Most of us live in a high rise and we organize our chores from lightest to heaviest, the heaviest being the things we have to lug up our steps of our apt. building last. Do you think we want to lug bulky phone books anywhere, when it is all on line?

  5. John says:

    Idearc has been moving to online local search and their product is generating over a billion searches per month. I think idearc has a bright future but they do need to sort out the bond structure with their creditors.

  6. Lee says:

    Superpages.com generates millions of searches each month, per their site advertising.superpages.com. Google generates close to 3 trillion searches per month per a third party: searchenginewatch.com. Unfortunately verizon entered the online search party in an underfunded way originally. Both Bell Atlantic and GTE had online search projects before the merger, but they were underfunded and undervalued by the leadership. It will be very difficult to turn Idearc, being such a big ship, I hope they can succeed, I have a lot of friends their.

  7. abc says:

    YP is very much old history. I honestly can not remember the last time I used the YP (or the internet pages). It is simply not a viable product.

  8. rabbit says:

    Superpages might be a good thing for people online 24-7 looking for a specific item/service and who don’t mind scrolling through endless entries between here and Canada. But try looking for a pizza or a dog-groomer that’s minutes away or around the block, good luck. Hands down, the YP’s far more LOCAL with a far lower frustration level, and visually easier to deal with than the endless monotony of Courier fonts and the endless keying and geeking.

  9. CREDIA says:

    There are indications in other fora. Any debt service payments missed?

  10. marketinginc says:

    There are other “local” phone books to advertise in. Idearc has been over charging and under-delivering for a long time.

  11. Robert says:

    The numbers people are throwing around with respect to numbers of lookups online for Idearc are simply way off base. Having said that, YP print is not dead and still accounts for 60 to 70% of all local business search and online the rest of some 13,000,000,000 lookups. The real play to watch is AT&T Yellowpages.com. If they generate the needed lookups to compete iwht Google and Yahoo, they have the cash to buy them through their online distribution network whcih includes Yahoo Local, AOL, MSN, Mapquest and several others. The conversion rate-people who search online YP and actually buy something is about 50% for online directories to 2% for the major search engines. When you pick up the YellowPage Print Directory or Online version, your not just kicking the tires-your ready to buy. The YP industry is a great place to be with great margins. The rumors about its death are grossly exagerated.

  12. Jack M. Wolfson says:

    I was let go during my 2nd hip surgery in August 2008 after 7.9 years with Verizon. Since I was out on medical leave I was not producing for Idearc. Jesse Vickers of security was ordered to let everyone on medical leave to be terminated! I was number 2 out of 48 reps and always in the top 10. I was then denied Unemployment after 3 appeals. I won the 1st two.
    Therefore Idearc is getting what they deserve. What goes around comes around.

  13. Unhappy Customer says:

    I really hope they go out of business!! That’s what they deserve for their terrible practices at superpages.com, I’m sure there’s a good bunch of us who are really happy with the news. I’m not sorry for their sales team either. They’re fraud artists.

  14. RAG says:

    The posting suggesting that “bankruptcy” proviso in their contract would terminate Idearc’s agreement(s) ignores a relevant fact: Since October 1, 1979 those clauses (so-called “ipso-facto” clauses) have been unenforceable as a matter of bankruptcy law.

  15. JRS says:

    State Utilities Commissions require Telephone companies to publish a directory listing all customers on a timely interval. When directory companies no longer sell advertizing we will sure have thinner phone books.
    I think there is a future in IDEARC or some replacement.

  16. john says:

    I just took out ads out with them. I get anotice fromcourt today. what does this mean to me???????

  17. [...] sales”), so the company may well regain its health once it restructures.  On the other hand, as one blogger put it, perception is [...]

  18. Marianne Pacheco says:

    I am an Idearc Retiree. When we were spun off from Verizon, the Bell system Retiree’s organization warned us that Verizon was doing this so that the company (Idearc) could fail and then they could dump all of the retirees and their pensions, amonng other things. I guess they were right.

  19. My company signed a contract last year to have the Solutions On The Move direct mailer sent out to respective zip codes which I had purchased. Idearc Media had a very good salesman in Salt Lake City convince me also to switch my webpage hosting over to Idearc at this time. After I never received confirmation that these direct mailers went out, I waited before I sent payment to them whereas at this moment the Salt Lake City office has completely shut down and Idearc is giving me crap about needing to pay them. Sure as horse poo! My contract says even if the Publisher doesn’t deliver, the Advertiser, who is me, still contractually owes for the balance of the contract. Shame on Idearc for the deceit, double shame, shame on the ‘idiots’ like me who signed with them in the first place. Won’t hurt my feelings if this company just goes away like a bad habit.

  20. BipShiche says:

    I watch this guy for year, yea he do a lot of crazy stuff, but I know he is a really good and nice person. My boyfriend got his all best fights and we probably going to pray today and watch his in ring – so sad love you Mike.

  21. PreviousAdvertiser says:

    idearac and their sales people are bunch of scam artists. Scaring businesses to advertise in their yellow pages. YOU DO NOT NEED YELLOW PAGES TO ADVERTISE. Take your money and run. It is a waste. Millions of online advertising clicks to superpages.com marketed ny their sales people is another scam. Ask them to show you how many of those million clicks were related to you particular business. I wish they close their door. NOTHING BUT BUNCH OF CROOCKS LOOKING FOR BUSINESS OWNERS BLOOD. DON’t BE SCARED OF THEM. KICK THEM OUT>

  22. Danielle says:

    Seriously? That’s like saying that because GM has declared bankruptcy that people are going to stop buying and driving cars. There are more yellow page companies out there beyond Verizon, Idearc, etc. Because a few of them have outstanding debt loads that they’d like to unload doesn’t mean the whole industry is going to come crashing down. As hopeful as you all are that all consumers are going to just stop using print…let’s be real…it’s not going to happen, it might have a slow decline and level off, but I’m still picking up my book to order pizza, call a plumber, or find an auto repair shop…I’m not searching Google because it doesn’t give me exactly what I need without having to browse around here and there….and frankly, that’s more time than I care to waste for the simple and mundane tasks that I don’t need to research in order to make a buying decision. I love me some search, don’t get me wrong…but I still use my yellowpages, and my home magazines, and my newspaper flyers, when I make a purchase…it just depends on what I’m buying.

  23. Gail McHugh says:

    My company started expansion last year. It is a seasonal small business that serves 5 states directly and sells talent contracts internationally. I’m going to offer guest speaking services to Idearc Media on Business Etiquette.
    Even though their rep, whom I have worked with for a few years in a row, promised to call about a new display ad because of business expansion, I had to call her after I learned my company was put on an “auto renewal” that Idearc Media claims they mailed to us back in December (not).
    The Charleston Rep-Kim, apologized profusely and said she had gotten a promotion and noted the account so the new person (still remains unnamed) taking over her position would call us as promised. Kim stated she was really sorry that her associate did not do their job.
    Yea Kim for admitting the companies wrong treatment of us, but guess what? Idearc media’s customer’s service department reviewed it and said: The charges stand. This is all over $40.00 bucks a month! I’m suppose to trust them and want to do business with them for the cost of our new display ad’s for a few hundred a month? I don’t think so.
    We’ll give their CEO’s a chance to make it right and remove the charges. If they don’t? We just ordered the small memory card needed to transfer the voice recorded file of the Idearc rep’s explanation of what went wrong (fortunately their prompter telling me: “My call may be monitored or recorded” gave me a great idea)!

  24. John Bennett says:

    I have been watching Idearc Media for some time shortly after being spun off. I have a vested interest since I have an investment. I can tell you one thing with absolute certainty:

    I was forewarned by someone connected to the company when the shares were trading in the low 20′s that within a year the stock would plummet to $4 per share. Unfortunately, I didn’t take that statement seriously and went long. That statement was almost on the mark a year later.

    BooHoo Idearc and Verizon. Idearc for not performing due dilligence on the credit worthiness of it’s customer base and it’s lackluster business procedures, and Verizon for what appears to be an intentional move to buffet itself against the possibility of poor performance in the event of an inevitable end to the positive business cycle that was spawned in the early part of the decade. This was previously a great cash cow and your inaction put it out to pasture.

  25. YFM says:

    HA, I really enjoyed Gail’s post!!

    You are a “small/seasonal” business that services FIVE states AND you’re “International”. It’s hard to believe that your $40/month campaign didn’t produce a 7-digit ROI!! You’re clearly a marketing genius!!

    I am, however, behind you! I hope you are refunded the $70 annual investment you made for each state that you service. Good luck on receiving a call from one of their company’s “CEO’s”!! (You Twit!)

    Sincerely,
    Idark CEO #6

  26. Don Carlos says:

    MOST DEFINITELY DO NOT ADVERTISE ON THE VERIZON YELLOW PAGES, ITS A TOTAL WASTE OF MONEY, AS AN INSURANCE AGENT MY CONTRACT FOR A YEAR WAS $4300 FOR A 1/4 PAGE AD, IN A YEAR I ONLY GOT 82 CALLS, THATS $52.43 A CALL!!!!!!!! AND OUT OF THOSE 82 CALLS ONLY 32 POLICIES WERE SOLD, NOT EVEN CLOSE TO COVERING THE COST TO ADVERTISE. VERIZON IS A JOKE AND THEY ARE A BUNCH OF CROOKS. TELL THEM TO GET THE HELL OUT OF YOUR OFFICE WHEN THEY COME!!! SCAM ARTISTS!!

  27. Gail McHugh says:

    Update on Idearc Media: Good job Idearc Media! They did indeed have a rep call us. They took away the charges for this SEGMENT of our company as well as took us off the auto-renewal for all departments and states that we do business.
    I really appreciate professional people. As well as those who actually read text instead of scan over it.
    I wanted to take the time and applaud their decision makers.
    Funny when someone is giving out praise, we, as humans are the first who want the recognition but how funny when we want to speak ill we have tendencies to be cowards, peek from the dark, and be anonymous.
    In appreciation of Idearc Media and their professionalism: Gail McHugh

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