Travelzoo, Inc. (TZOO)

jkumph (76.35) Submitted: 5/02/08 7:06 PM : Start Price: $10.90 TZOO Score: -2.85

Classic dot com stupidity. What we have here is a frantic attempt to prop up a stock's value by "expanding" overseas. Travelzoo was an early and lucky internet venture that actually provided a useful newsletter. Now they're just a declining marketing company. Their expansion is clearly not working. Last quarter they spent $2.7 million expanding in Asia. Guess what their Asian revenue was? $20k. And they've been at this for a year. Granted, they've actually got some revenue in their European wing, but they're still losing money hand over fist ($2.2M last quarter), despite working at this since 2005.

The sensible thing to do would be to stop burning cash and simply milk their profitable, if declining, U.S. operations for the next ten years. But then the stock would have to fall by at least 50% from its present value of $11. Instead, management keeps throwing more and more cash out the window. Ultimately, this will lead to greater and greater losses, with the stock dropping even further than if they just let things go.

But I guess they feel the need to prop up something else besides their stock value. Their ego, that is.

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