Company settles spyware suit for $7.5 million

New York suit had charged that Intermix's practice of bundling spyware with other software violated laws on false advertising.

Intermix Media has agreed to pay the state of New York $7.5 million to settle a lawsuit charging it with bundling hidden "spyware" along with millions of programs it gave away for free, the company said Tuesday.

The Web marketing company also said it would permanently discontinue distribution of its adware, redirect applications and toolbar programs, all of which Intermix noted it has previously stopped distributing. Intermix said it did not admit any wrongdoing or liability.

Intermix shares rose $1.50, or 24.6 percent, to $7.60 in after-hours trading on Inet following the news.

The settlement deal follows New York Attorney General Eliot Spitzer's April lawsuit charging that the company's practice of bundling hidden spyware violated state laws prohibiting false advertising and deceptive business practices.

It also came as the company on Tuesday posted a fourth-quarter net loss of $409,000, compared with a loss of $4.4 million a year ago. Revenue rose to $24.1 million from $14.4 million, boosted by gains at its Alena business unit and network segment.

The results also reflected a gain of $6.3 million related to an investment in its newly formed, majority-owned subsidiary MySpace and a $6.9 million reserve established in connection with Spitzer's lawsuit, Intermix said.

Spitzer's office had sought to stop Los Angeles-based Intermix from secretly installing software on people's computers, make it return money it made from the process, and pay a fine.

These programs were secretly bundled with other software designed to deliver pop-up advertising or steer Web traffic to an Intermix search engine, Spitzer charged in the lawsuit.

Under terms of the settlement, Intermix agreed to pay $7.5 million to the state over three years. Since Spitzer's initial inquiry, Intermix also said it has created the position of chief privacy officer and worked with federal regulators to help protect Internet consumers.

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