Blinkx seeks transformation as sales fall

Blinkx, the online advertising company that has suffered a near 80 per cent decline in its share price in 15 months, reported a fall in annual revenues on Wednesday but claimed to have made "transformational moves" to turn its business around.

In a trading update for the year to the end of March, Blinkx said it expected to report revenues of "at least $210m" - down from $247m in the previous financial year - and its first fall in annual sales.

Brian Mukherjee, chief executive, said: "In a sector characterised by rapid change, we made transformational moves to stabilise and strengthen our core revenue streams while positioning the company in the emerging high-growth areas of the industry."

However investors appeared unconvinced, as Blinkx's share price declined 13 per cent by midday on Wednesday.

Shares in the company - which provides an internet video platform and makes money from advertising - have fallen sharply since January 2014, when Ben Edelman, an associate professor at Harvard Business School, raised questions about the legitimacy of its business model.

In a widely-circulated blog post, Mr Edelman raised concerns about the way Blinkx generates traffic for its content and its links to two advertising software companies, Zango and AdOn. Blinkx published a detailed rebuttal and complained to the Financial Conduct Authority about alleged market manipulation.

Blinkx had originally focused on providing the technological infrastructure to deliver video advertising on desktop computers, and to connect advertisers and content publishers. More recently, though, it has been attempting to break into the market for advertising on mobile devices - the fastest-growing segment of the digital advertising market.

But Alex DeGroote, analyst at Peel Hunt, said there was no sign that Blinkx's underlying business performance was about to reach "an inflection point to the upside" - and suggested that Blinkx's "ultra low valuation" meant it could become an acquisition target.

In a research note tilted "Limping along", Mr DeGroote said Blinkx appeared to have "suffered from cash attrition" in recent months, as its net cash dropped from $114m in September to about $90m in March.

Analysts and investors are bracing for further possible criticism of Blinkx later this month when Mr Edelman, who is nicknamed the "web sheriff", visits the UK for an investor show.

Blinkx was spun out of Autonomy, the computer software company founded by Mike Lynch, in 2007 via an initial public offering on London's Alternative Investment Market.

On Wednesday, the company's trading update said that it expected to report adjusted earnings before interest, tax, depreciation and amortisation of "at least $3m". That figure strips out various exceptional costs including acquisitions. Blinkx plans to release its full-year results on 18 May.

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