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Apr-30-2008IAC Net Falls As Diller Plans Split(topic overview)
CONTENTS:
- NEW YORK (Reuters) - IAC/InterActiveCorp (IACI.O: Quote, Profile, Research ), which plans to spin off four of its largest units, said on Wednesday its quarterly profit fell from a year ago, hurt by declines at its catalog business and a loss at online mortgage site LendingTree. (More...)
- IAC's media and advertising unit, whose largest business is Ask.com, increased sales 28 percent to $215.5 million and operating profit almost tripled to $30.7 million. (More...)
- Bottom line : In the statement, CEO Barry Diller said the quarter's results demonstrate: "it couldn't be clearer that we are on the right course in separating IAC into 5 distinct public entities." (More...)
- Product sales increased to $723.5 million from $706.5 million, while service revenue grew to $878.8 million from $783.6 million. (More...)
- NEW YORK, April 28 (Reuters) - LendingTree LLC, an online mortgage unit of Barry Diller's Internet conglomerate IAC/InterActiveCorp (IACI.O: Quote, Profile, Research ), has reported a data breach in which several former employees gave mortgage lenders access to confidential customer records. (More...)
- Analysts' concerns that the economy would hurt ad sales at Ask.com eased after Google Inc., which sells most of the search engine's advertising, reported first-quarter results April 17 that beat analysts' estimates. (More...)
- Sales at the Cornerstone Brands catalog unit slid 7 percent, while the HSN TV channel and Web site gained 9 percent. (More...)
- Diller's 2007 pay included a $500,000 salary, unchanged from a year earlier. (More...)
- In March, the two men battled in a Delaware court over Diller's proposal to break up IAC into five separate companies. (More...)
- All times are ET. : Time reflects local markets trading time. - Intraday data delayed 15 minutes for Nasdaq, and 20 minutes for other exchanges. Disclaimer (More...)
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NEW YORK (Reuters) - IAC/InterActiveCorp (IACI.O: Quote, Profile, Research ), which plans to spin off four of its largest units, said on Wednesday its quarterly profit fell from a year ago, hurt by declines at its catalog business and a loss at online mortgage site LendingTree. The Internet conglomerate run by Barry Diller said its first-quarter net profit fell to $52.8 million, or 18 cents per share, from $60.7 million, or 20 cents per share, a year ago. [1] Profit dropped on higher technology spending as Ticketmaster competes with EBay Inc.' s StubHub.com ticket-resale unit and as concert promoter Live Nation Inc., Ticketmaster's biggest customer, prepares to process tickets itself. "Margins at Ticketmaster dropped to 21 percent from 26 percent a year ago,'' said Ross Sandler, an analyst at RBC Capital Markets in New York, who said the stock should perform in line with its peers. "That is not going to go over well.'' LendingTree's revenue fell 38 percent to $70.2 million, in line with an estimate by Devitt, who recommends holding IAC shares and doesn't own them.[2]
Disappointing results at HSN or one of IAC's other four units may further hamper Chairman Barry Diller's plan to break up the New York-based company, said Scott Devitt, an analyst at Stifel Nicolaus & Co. in Manassas, Virginia. He estimates sales growth at HSN slowed to 5 percent last quarter, down from an 8 percent increase in the three months through December. Profit at the unit probably fell 12 percent, he said. "They won't get the hoped-for turnaround at HSN,'' said Devitt, who recommends investors hold IAC stock and doesn't own it. "They're fighting a tough economic headwind, so even if the business is improving you won't see it this quarter.''[3] Barry Diller's e-commerce empire IAC/InterActiveCorp said its first-quarter profit fell from a year ago due to continuing problems in its retailing and home-lending businesses and tighter profits at Ticketmaster. The results are likely to be one of IAC's last report cards in its current structure. IAC is in the midst of plans to spin off four of its older businesses, Ticketmaster, HSN, LendingTree and Interval International, a time-share exchange, retaining its ad-supported Internet businesses such as Ask.com and Match.com.[4] Ask.com came in far better than expected.'' The results indicate most of IAC's divisions are performing well as Diller prepares to break the company into five independent businesses, said Lindsay, who recommends holding the shares and doesn't own them. The HSN home-shopping division missed his sales and profit forecast, while Ask.com and Ticketmaster Inc. beat predictions.[2]
Diller, IAC's chairman and chief executive, is trying to boost the stock after a 57 percent drop since July 2003. The shares rose 4 cents to $20.46 at 4 p.m. New York time in Nasdaq Stock Market trading and are down 24 percent this year. In November, Diller, 66, proposed separating the company, whose brands include Ticketmaster Inc. and time-share manager Interval International Inc. Under his plan, HSN, Ticketmaster, LendingTree and Interval would each become independent.[3] Excluding special items, earnings for the latest quarter totaled 30 cents per share, slightly below the average Wall Street forecast of 31 cents per share, according to Reuters Estimates. Revenue rose 8 percent to $1.6 billion, helped by a 9 percent increase at its HSN cable shopping network and excluding the operations of America's Store, which ceased last year.[1] Revenue grew to $1.6 billion from $1.49 billion a year ago, beating Wall Street expectations of $1.53 billion. IAC's first quarter had been saddled with an ongoing lawsuit filed by Liberty Media LINTA, which owns a 30% stake in the company and about 62% of its voting control through a second class of super-voting shares.[5] A consensus of Wall Street analysts expects that IAC ( IACI, Fortune 500 ) generated $1.53 billion in revenue during the first quarter of 2008, or $.30 in adjusted earnings per share.[6] ANALYST TAKE: In a recent note to clients, Citi Investment Research analyst Mark S. Mahaney predicted IAC will report adjusted earnings of 26 cents per share on $1.62 billion in revenue. "Given the macro headwinds in retail (particularly in offline catalogues) and real estate and rising online marketing costs, we anticipate an inline quarter _ i.e. we anticipate that IAC will report March quarter results that generally meet current Street estimates," he said.[7]
"We believe ownership conflicts are likely to resurface, and uncertainty is an overhang," wrote Mahaney, who maintains a "hold" rating on IAC shares. He also noted that unlike many of IAC's e-commerce peers, international sales are only 11 percent of total revenue. Google ( GOOG, Fortune 500 ), eBay ( EBAY, Fortune 500 ), and Amazon.com ( AMZN, Fortune 500 ) all generate close to half of their revenues overseas, where they gain from higher growth prospects, lower tax rates, and currency exchange benefits. Wednesday's earnings release will offer an indication as to whether IAC brands like Ask.com and Match.com are maintaining some revenue growth, as analysts speculate they have been in the first quarter of 2008, even in the midst of consumer penny-pinching.[6]
IAC shares will track the market, said Lindsay, who doesn't own any himself. Low traffic at HSN's Web site also points to slowing growth, he said. HSN gets about a third of its sales online. Most bad news about LendingTree, an online exchange that matches potential borrowers with up to four banks that compete for their business, is already reflected in IAC's stock price, Bernstein's Lindsay said. His estimate that IAC is worth $25 a share doesn't include any value from LendingTree.[3]
Net income fell to $52.8 million, or 18 cents a share, from $60.7 million, or 20 cents, a year earlier, New York-based IAC said today in a statement.[2] IAC/InterActiveCorp (IACI) Wednesday said its first-quarter net income fell 13% to $52.8 million, or 18 cents a share, from $60.7 million, or 20 cents a share, a year earlier.[8] Net income after preferred dividends for the period ended March 31 dropped to $52.8 million, or 18 cents per share, compared with $60.8 million, or 20 cents per share, in the previous year.[9] Net income, however, slipped 13 percent to $52.8 million ($.18 per share) from $60.7 million ($.20 per share). Earnings were hit by income decline at HSN?which is seen as a possible bargaining chip in its attempt to completely extricate itself from John Malone and Liberty Media (NSDQ: LINTA).[10]
Operating income was down 4%, to $135 million; Barry and co blamed the decrease on "a difficult macro environment on our Catalogs business, profit declines at Ticketmaster, and transaction expenses in connection with our planned spin-offs." Most interesting to us is IAC's breakout of the 5 companies it imagines it will be, post break-up. (It's still trying to give one of those companies -- HSN -- to Liberty Media so it can complete its messy divorce with John Malone)[11] Diller is working on plans to separate HSN, LendingTree, the Ticketmaster box office service and the Interval time-share exchange company from IAC, which will then focus on the company's faster-growing Web media and advertising operations. The former television and film executive won a court battle last month against IAC's controlling shareholder, Liberty Media Corp, which tried to oust him over the proposed control structure of the spin-offs. While a Delaware court upheld Diller's authority at the company as chairman and chief executive, he must still smooth over differences with Liberty and its Chairman John Malone to reach an agreement over details of the spin-offs.[1] OVERVIEW: The Internet conglomerate's first quarter was dominated by a skirmish with major shareholder Liberty Media Corp. surrounding IAC's intention to split into five parts. At the end of March, a Delaware judge sided with IAC chief executive Barry Diller and against Liberty, deciding Liberty had failed to prove Diller violated an agreement between them by pursuing the breakup plan.[7]
Diller's plan to split IAC was unsuccessfully challenged in court by Liberty Media Corp., which owns 30 percent of the company's shares.[3] Malone's lawyers made the trial referendum of sorts on Diller's leadership of the company. Unlike his success in the movie and television business, Diller's IAC had some early successes, but over the last five years, shares have fallen 59 percent. Diller insists he sketched out the spinoff plan to unlock growth. Malone wanted to oust Diller, claiming Diller's breakup proposal was a breach of his duty to shareholders.[6]
Liberty Chairman John Malone, who sits on IAC's board, said that the deal would unfairly reduce Liberty's voting rights in the four spun-off companies. Delaware Chancery Court Judge Stephen Lamb ruled March 31 that the spinoff plan didn't exceed Diller's rights under a 1995 agreement that lets him vote Liberty's shares.[3] Malone asserted that Diller's plan was an attempt to wrest control of IAC from Malone's Liberty Media, because the scheme would have diminished by half Malone's 61 percent majority voting rights in the new spinoffs.[6]
While Liberty Media Corp. owns about 30 percent of IAC's equity, it controls about 62 percent of the voting power because of a dual-share structure.[9]
Liberty holds more than 60 percent of the voting rights in IAC, because it owns Class B shares that get 10 votes each.[3] Liberty owns about 30 percent of IAC's equity but controls about 62 percent of the voting power due to a dual-share structure.[7]
IAC's media and advertising unit, whose largest business is Ask.com, increased sales 28 percent to $215.5 million and operating profit almost tripled to $30.7 million. [2] Operating profit at HSN, IAC's largest division, dropped 43 percent to $20.2 million as sales gained 1.5 percent to $676.9 million.[2]
Sales jumped 22 percent to $392 million at what Diller calls "New IAC,'' with Ask's growth outpacing the 10 percent sales gain at Match.com.[2] Op income in that unit fell 42 percent to $20.2 million. Revenue growth at 'New IAC', as it would be called post-spin, was up 22 percent, with its op loss slimming to $33 million from $39 million.[10] Total queries declined due to a decrease in marketing?so fewer Ask.com ads on TV, which is something analysts had been wanting to see go. Revenue fell 38 percent, and the unit's loss deepened to $8.7 million from a loss of $7.8 million.[10]
The New York Internet company said revenue rose 8% to $1.6 billion from the same period last year, helped by results at HSN, Ticketmaster and other units.[8] Sales rose 7.5 percent to $1.6 billion, beating the $1.53 billion average of 12 analysts' estimates compiled by Bloomberg. "Overall, it's definitely better than expected,'' said Jeffrey Lindsay, an analyst at Sanford C. Bernstein & Co. in New York.[2] Quarterly sales rose to $1.6 billion, up 7 percent from $1.49 billion in the prior year. That beat Wall Street's estimate of $1.53 billion.[9]
In its first report since a Delaware court win affirming chairman and CEO Barry Diller's authority, IAC (NSDQ: IACI) announced Q1 revenue of $1.6 billion an 8 percent increase from $1.49 billion in the year-ago quarter.[10] Barry Diller's about-to-be-broken-up IAC's Q1 meets the Street's modest expectations: Revenues are up 8%, to $1.6 billion (vs. $1.5B consensus) and adjusted EPS was 30 cents, which is where the Street had predicted it would fall.[11]
Bottom line : In the statement, CEO Barry Diller said the quarter's results demonstrate: "it couldn't be clearer that we are on the right course in separating IAC into 5 distinct public entities." Certainly, now that the company introduced the notion of the spin, it's hard to imagine what business these disparate units have being under the same roof. [10] If the company he helms, IAC/Interactive Corp, posts a good earnings for the first quarter, the CEO can begin the process of mending his bruised reputation as a deft leader. If the results are lackluster, they may lend additional support for Diller's proposal to break IAC into five parts.[6] In a statement Wednesday, Diller maintained that spinoffs are still the way to go. "With this quarter's results, it couldn't be clearer that we are on the right course in separating IAC into five distinct public entities," he said. "Each of the businesses have their own unique opportunities -- some with current challenges and others with wind at their backs."[5]
Diller's plan would result in five separate companies: HSN, Interval International (a vacation timeshare exchange), LendingTree, Ticketmaster and IAC, which would include the Ask.com and Match.com holdings. IAC's board is expected to meet this week to begin ironing out the specifics of the breakup scheme. They are not expected to reach a conclusion on how to proceed anytime soon, something that is likely to be a drag on the stock, say analysts.[6] Diller initially announced plans to spin off IAC's HSN home shopping network, Ticketmaster, LendingTree.com and Interval time-share businesses in November. During the quarter, IAC said Doug Lebda would become head of its financial services and real estate businesses, and Jim Safka the new CEO of Ask.com.[7] Diller, 66, has proposed spinning off HSN, LendingTree, the time-share management firm Interval International Inc. and Ticketmaster Inc. IAC would keep Ask.com, the Match.com dating service and several smaller Web businesses.[2]
Diller said on the fourth-quarter earnings call in February that HSN had reversed declines in sales and profit. He also said online advertising had boosted the Ask.com search engine, positioning most IAC businesses to thrive after the breakup.[3] HSN is expected to post earnings improvements over 2007, as a result of a restructuring that included operational improvements and greater use of the network's website as a conduit for sales. IAC companies such as Ticketmaster, LendingTree, and Cornerstone Brands are seeing slower sales.[6]
Ticketmaster sales rose 15 percent to $349 million, buoyed by two acquisitions, while operating income fell 21 percent to $51 million.[2] LendingTree sales probably fell 38 percent to $70 million in the first quarter, while the division's loss widened to $5 million, according to Stifel's Devitt.[3]
The company said Wednesday that first-quarter profit fell to $52.8 million, or 18 cents a share, compared with $60.8 million, or 20 cents a share, a year ago.[5] In the same period a year ago, the company posted adjusted income of $96.9 million, or 31 cents a share.[12]
BOSTON (Thomson Financial) - IAC/InterActiveCorp. Wednesday said first-quarter adjusted income fell to $87.2 million, or 30 cents a share, in line with the mean estimate of analysts polled by Thomson Reuters.[12] Excluding expenses and other items, earnings fell to $87.2 million, or 30 cents per share, from $96.9 million, or 31 cents per share, which met the expectations of analysts polled by Thomson Financial.[9] Adjusted for certain items, earnings totaled $87.2 million, or 30 cents a share, compared with $96.9 million, or 31 cents a share. That was in line with consensus estimates by analysts surveyed by Thomson Financial.[5]
Excluding some costs, IAC's profit fell to 30 cents a share, missing the 31-cent average of 11 analysts' estimates.[2]
On average, analysts polled by Thomson Reuters expected earnings of 18 cents a share.[8] Excluding some expenses, analysts anticipate earnings dropped to 31 cents a share from 33 cents.[3]
Says Bernstein Research analyst Jeffrey Lindsay, "a poor earnings result would lend weight to the notion that the breakup needs to happen as soon as possible because certain parts of the company are holding others back."[6]
Investors are hoping the plan is carried out by the end of the third quarter, at the latest. IAC highlighted the performance of what it calls "New IAC" -- businesses that will remain with the company, including online dating service Match.com and search engine Ask.com -- in its statement on results.[1] Revenue at the "New IAC"'s biggest unit -- its media group -- grew 28%, primarily due to a renewed Google (GOOG) deal which resulted in an increase in revenue per query across all proprietary search sites". A nice bonus: Though Ask's queries continue to decline -- the company says it's because it's advertising less, not because Google is crushing all competitors -- "Revenue and revenue per query at Ask.com grew strongly, even excluding the benefits of the renewed contract."[11] The growth in ad revenue was partly attributed to the company's renewed partnership with Google (NSDQ: GOOG), which it said contributed to higher revenue per query on Ask.com.[10]
Product sales increased to $723.5 million from $706.5 million, while service revenue grew to $878.8 million from $783.6 million. Costs rose for both product sales and service revenue, along with selling and marketing and other general expenses. [9] Revenue probably fell 3.8 percent to $1.53 billion, according to the average of 12 estimates.[3]
Net income may have declined to $54.6 million from $62.1 million a year earlier, according to the average of seven analysts' estimates compiled by Bloomberg.[3] IAC posted a $144 million loss last year, as a tough credit market hurt the company's LendingTree home-loan business.[13] IAC was forced to take a $457 million write-down on mortgage broker LendingTree's 2007 loss of more than $500 million.[6]
NEW YORK, April 28 (Reuters) - LendingTree LLC, an online mortgage unit of Barry Diller's Internet conglomerate IAC/InterActiveCorp (IACI.O: Quote, Profile, Research ), has reported a data breach in which several former employees gave mortgage lenders access to confidential customer records. In an April 21 letter to customers, LendingTree said a "handful" of lenders obtained access to customer information such as Social Security numbers and income and employment data and used it to market their own mortgages. [14] NEW YORK (AP) — IAC/InterActiveCorp, the Internet conglomerate led by Barry Diller, said Wednesday its first-quarter profit slipped 13 percent marketing and other expenses, but adjusted results met expectations.[9] April 30 (Bloomberg) -- IAC/InterActiveCorp, Barry Diller's Internet company, said first-quarter profit dropped 13 percent.[2]
Lackluster profits could boost CEO Barry Diller's plan to split the Internet conglomerate into five companies.[6]
Liberty claimed that IAC's chief executive, Barry Diller, was trying to dilute that stake by proposing to break up IAC into five separate companies and give each spin-off a single-tier voting structure.[5]
Last month, a court sided with Diller against Liberty Media Corp., a major shareholder in a ruling that will likely determine the fate of IAC.[9] In March, Diller won the first round of a court battle with IAC's largest shareholder, Englewood, Colorado-based Liberty Media Corp., which tried to block the deal.[2]
Diller said in November that would break IAC/Interactive into five separate publicly traded companies and eliminate Liberty Media's control.[9]
Through an agreement between them, Diller has controlled Liberty's votes for years. Liberty had sued to reclaim the voting rights it claims Diller gave up when he went against Liberty's will in pushing for the breakup.[7] Analysts believe that to be a poor performance, considering that Internet advertising is growing at 22 percent a year and e-commerce is growing at around 19 percent each year. Diller and Malone revealed during the March trial that they have been talking all along to hash out an agreement that might, say, spin the companies off and compensate Malone for his reduction in voting rights.[6]
Cornerstone, a catalog company that relies heavily on the sale of housewares and home goods, is suffering due to the housing downturn as well. As it stands, Bernstein Research's Lindsay believes "it is increasingly unlikely that IACI will meet its original spin-out deadline of third quarter 2008 and the implementation could be delayed well into 2009," he noted in a recent report. "It's not clear that any of the players have come to an agreement on how they'll allocate debt, voting rights, and assets," Lindsay wrote.[6] The judge declined to rule on the spinoff plan itself because it has yet to be put into action. IAC's board has voted to support the spinoff in principle, but has yet to determine how they will allocate shareholder voting rights, debt, or assets among the new companies.[6] WHAT'S AHEAD: There could be more legal issues with Liberty ahead. The Delaware judge said it was too early to decide whether IAC directors met their fiduciary duties on voting for or against the spinoffs, since they had not yet fully approved the plan or its details. Lamb wrote that he would reserve judgment on that until a later date, if needed.[7]
IAC and Diller also ran into a legal challenge over plans to split the company into five pieces.[13] IAC is slated to report first-quarter earnings Wednesday, when Diller is expected to further detail the company's planned breakup.[13] Wednesday's earnings offer the first look at IAC's numbers since a courtroom battle between Diller and major investor John Malone put Diller's leadership under intense public scrutiny.[6]
Diller told analysts in IAC's fourth-quarter conference call that the new deal would make Ask more profitable.[2] HSN may now be struggling because it has a less affluent audience than Liberty's QVC, according to analyst Jeffrey Lindsay at Sanford C. Bernstein & Co. in New York.[3] NEW YORK (Associated Press) - IAC/InterActiveCorp reports earnings for the first quarter on Wednesday.[7]
SAN FRANCISCO -- Internet conglomerate IAC/InterActive Corp IACI managed to meet Wall Street's earnings expectations, but its Lending Tree division continues to lose ground.[5]
Analysts' concerns that the economy would hurt ad sales at Ask.com eased after Google Inc., which sells most of the search engine's advertising, reported first-quarter results April 17 that beat analysts' estimates. [3] Sales rose more than analysts expected on gains at the Ask.com search engine.[2]
Sales at the Cornerstone Brands catalog unit slid 7 percent, while the HSN TV channel and Web site gained 9 percent. [2]
In the fourth quarter, IAC wrote down almost two-thirds of the value in the unit as revenue plunged.[3] More than half of the revenue gain came from ResortQuest Hawaii, a vacation-rental business IAC bought last May.[2]
The 'Chinese Google' tops revenue estimates. The company takes down its full-year operating income forecast.[5]
The company valued Diller's stock-option pay at $14 million, also the same as 2006, reflecting the recognition of a 2005 grant of options.[13] The operating loss narrowed to $33.3 million from $39.2 million on lower marketing costs at Ask.com.[2]
Diller's 2007 pay included a $500,000 salary, unchanged from a year earlier. [13] Last month, a judge ruled in favor of IAC, saying that Diller didn't need Liberty's permission to propose the spinoffs.[5] The judge ruled that Diller does not need to get Liberty's approval to split up IAC.[7]
In March, the two men battled in a Delaware court over Diller's proposal to break up IAC into five separate companies. [6]
IAC's board decided the company didn't meet performance objectives for last year.[13]
All times are ET. : Time reflects local markets trading time. - Intraday data delayed 15 minutes for Nasdaq, and 20 minutes for other exchanges. Disclaimer [13] April 29 (Bloomberg) -- IAC/InterActiveCorp may report a drop in first-quarter profit tomorrow as slowing U.S. economic growth hampered a turnaround at the HSN shopping channel and hurt its LendingTree mortgage business.[3]
SOURCES
1. IAC quarterly profit falls | Markets | Hot Stocks | Reuters
2. Bloomberg.com: Worldwide
3. Bloomberg.com: U.S.
4. Free Preview - WSJ.com
5. IAC/InterActiveCorp Meets Profit Estimates | Internet | IACI LINTA - TheStreet.com
6. IAC's make-or-breakup earnings report - Apr. 30, 2008
7. Earnings Preview: IAC/InterActiveCorp to report 1st quarter
8. IAC/Interactive 1Q Net $52.8 Million Vs Net $60.8 Million, -13%
9. The Associated Press: IAC 1Q profit drops on rising costs
10. Earnings: IAC Q1 Revs Up 8 Percent; 'New IAC' Revs Up 22 Percent; Income Down 13 Percent - washingtonpost.com
11. IAC Q1 In-Line; Ask Revenue "Grew Strongly" (IACI) - Silicon Alley Insider
12. IAC/InterActiveCorp 1Q adjusted income meets estimates; revenue up 8% | Latest News | News | Hemscott
13. UPDATE: IAC CEO Diller Gets Pay Package Valued At $15.4 Million
14. LendingTree reports data breach | Markets | Markets News | Reuters
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