2nd UPDATE: IAC/Interactive Swings To 3Q Profit, Beats Views
27 Octubre 2009 - 1:44PM
Noticias Dow Jones
IAC/InterActiveCorp.'s (IACI) group of Internet properties
reported Tuesday a third-quarter profit despite declining revenue,
as Chief Executive Barry Diller said he plans to invest some of the
company's cash in new media content businesses.
Diller also said he's open to "consolidating transactions" in
the Internet search business and that he held unsuccessful
negotiations with fellow media mogul John Malone's company, Liberty
Media Corp. (LCAPA, LINTA, LMDIA), about a "large transaction."
IAC's results exceeded expectations despite continued revenue
declines that underscored the slump in ad markets and the
uncertainty facing Diller as he angles further into the business of
content creation, where investors have largely failed to drive
returns amid the rise of the Internet.
"If you're going to build a business, you have to invest to get
there," said Diller, addressing widespread concerns among investors
that IAC will deplete its $1.8 billion cash pile on acquisitions.
He added that IAC plans to invest roughly 10% of its cash reserves
on media acquisitions over the next several years, while using the
rest to grow existing businesses or return value to
shareholders.
While he expressed confidence that premium media content
creation will evolve into a growth business with multiple revenue
streams outside of advertising, Diller also said display
advertising won't be able to support online content businesses.
Kerry Rice, analyst with Wedbush Morgan Securities Inc., said
Diller is likely moving in the right direction.
"It's been difficult to figure out the right way to monetize
content on the Internet, but the popularity of sites like Hulu has
proven this will be an area of Internet and media convergence that
is going to be a huge opportunity," said Rice.
TV network owners with a stake in Hulu, like News Corp. (which
owns this newswire and The Wall Street Journal) and NBC Universal,
have said they're considering an online subscription business to
boost profitability on the popular web video site. Meanwhile, Time
Warner Inc. (TWX) recently spun off its cable distribution business
to focus on content creation, and Comcast Corp. (CMCSA), the
nation's largest cable provider, is in talks with General Electric
Corp. (GE) about taking a majority stake in NBCU.
For its part, IAC owns The Daily Beast, an Internet journalism
outlet, and it has partnered with Ben Silverman, the former head of
NBC Entertainment, on a media production startup called
Electus.
Divestitures, like the sale of its Match Europe unit and shares
of OpenTable Inc. (OPEN), boosted IAC to a quarterly profit. It
earned $21.3 million, or 16 cents a share, compared with a
year-earlier loss of $15.2 million, or 11 cents a share. Last
year's results included expenses tied to the company's breakup.
Excluding items, IAC's earnings were 34 cents a share, compared
with a year-ago loss of 14 cents a share. Analysts surveyed by
Thomson Reuters projected earnings of 13 cents a share.
Revenue decreased 8.9% to $336.6 million but also beat
expectations for revenue of $335 million.
Shares of IAC were recently trading up by 9 cents a share to
$19.45 after rising by more than 4% in earlier trading.
The parent of properties like Ask.com and Match.com, which split
into five different companies just over a year ago to slim down its
sprawling portfolio, has posted a profit in three of the past four
quarters following the restructuring. Revenue, meanwhile, has been
falling in a weak advertising environment.
On a conference call following its earnings release, Diller said
the competitive environment in search is "fierce" and he said
growth prospects for the company's largest search business,
Ask.com, has become "speculative." He said he would be open to a
"consolidating deal" with IAC's search assets while noting it's
unlikely that IAC would be the consolidator.
Currently, IAC outsources paid search advertising on Ask.com to
Google Inc. (GOOG), and Diller's comments suggest he would consider
merging the entire business with a larger rival since business has
failed to grow its market share. ComScore recently reported that
Ask.com's search market share held steady in September at 3.9%,
while Google controlled 65% of the market, Yahoo Inc. (YHOO) held
18.8% and Microsoft Corp. (MSFT) had 9.4%.
Meanwhile, Diller said the company "spent several months sorting
through" a potential deal with Liberty in the third quarter, but
the talks ended unsuccessfully for "technical reasons," even though
both sides wanted to proceed.
Diller said he wouldn't rule out a resumption of deal talks with
Liberty in the future, but the negotiations are now over, in his
view. He declined to comment further on the subject.
Liberty has sold about 4 million Class A shares of IAC since
September, and the company has a contractual obligation to sell 7.5
million more shares in the market before February. A spokeswoman
for Liberty couldn't be reached for comment.
-By Nat Worden, Dow Jones Newswires; 212-416-2472;
nat.worden@dowjones.com
(John Kell contributed to this story.)