Small but Growing Internet Holding Firm Looks for Buys
Albert Reda and Louis Cherry don’t fit the stereotypical image of baby-faced geeks running an Internet company out of their parents’ basement. The duo counts 54 and 72 years under their belts, respectively.
And their Newport Beach company, which goes by the ungrammatical name of Internet Business’s International Inc., doesn’t fit too many new economy clich & #233;s, either.
For one, the company is profitable. And despite having an over-the-counter penny stock that trades at less than the price of a pack of gum, the pair hopes to increase sales fivefold this year to more than $10 million.
Its business spans Internet access service to online sunglasses sales. Internet Business’s reported earnings of $31,000 on sales of $1.2 million for its most recent quarter ended March 31. While a 2.5% profit margin is thin, it’s better than many Internet companies that are losing money.
Staying Power
“We’re not a cut-rate operation,those companies aren’t going to stick around,” said Reda, a real estate and mortgage veteran who became interested in getting into the dot-com arena a few years ago.
Reda has an engineering background and said he’s been interested in computers since “long before they were small enough to carry around.”
He teamed up last year with Cherry, who has years of experience in the banking and food service industries. The partners raised money from friends and family to buy a controlling interest in the defunct International Food & Beverage Inc. and transformed it into an Internet company.
The partners, who also are on the board of laundry-detergent maker Detergents Resources Inc., met while doing work in the food-service industry.
“It was approaching the year 2000, and it just seemed like the thing to do,” Cherry said. “I wanted to get with the times.”
Easier Access to Funds
Reda said buying an existing public company such as International Food,it sold shares on the over-the-counter exchange and reported financial information to the Securities and Exchange Commission,was an easier way of taking the Internet business public and getting access to investors to raise money.
Originally, the two wanted to develop an Internet hub for chatters, allowing fans of sports teams or movies to talk to one another. But after seeing that numerous chat sites already exist,and few if any are making any money,they changed their plans.
They quickly retooled, and today the firm acts as a holding company for about a dozen Internet operations ranging from Internet access provider LAinternet to online loan mortgage firm Net2Loan to online sunglasses merchant Optical Brigade. All came as acquisitions, and according to Reda, each subsidiary is profitable or at least break-even.
Combined, the 11 companies employ about 80 people. Internet Business’s finished moving into its Newport Beach headquarters near John Wayne Airport in late June.
Together, Reda and Cherry control about half the company. The stock trades at about 25 cents, down from 30 cents in its first days as a free-trading stock.
That price leaves the stock vulnerable to wild swings in value and makes it easy prey for con artists to pump or malign the stock for profit.
Indeed, Reda threatened legal action last month against anyone who posted “unfounded and disparaging statements” against Internet Business’s or its management in Internet discussion groups. Still, with the volume of pro-company messages appearing recently on at least two Web discussion groups, illicit hyping appears to be as likely.
The company’s shares have become one of the most heavily traded over-the-counter stocks in recent months, averaging between 2 million and 3 million trades per day. Reda said he hopes eventually to move his company’s shares to the Nasdaq exchange.
Overseas Future
Reda is putting his biggest hopes in the company’s Eastern European venture, Global Group Purchase Plan, a Hungary-based Web operation that allows suppliers to compete for the buyers who have signed onto the service.
Three Slovenian companies have committed to purchasing a combined $56.5 million through the site in the next year. And while any Eastern European venture carries big risks, Internet Business’s is considering importing the model to use in a U.S.-based operation.
And with many dot-coms beginning to run out of money, Reda said acquisitions likely will play big in his company’s growth strategy going forward.
“It isn’t a matter of being late,” he said. “We may not be the biggest. But we’ll be there and we’ll be profitable,that’s our piece of the pie.” n
