InfoSpace sees return to black in third quarter

InfoSpace expects to return to profitablity later this year.

During a Monday conference call with analysts, InfoSpace executives said they expect the company to break even in the third quarter of 2001, and earn a penny per share in the fourth quarter. The vendor of technology and services for online content and commerce expects to lose 5 cents per share for the full year.

The company last month promised to release updated financial targets. Although the latest projection is an improvement from its earlier forecast calling for a 2001 loss of 14 cents per share, some analysts were disappointed the company did not raise its previous revenue target of $215 million for the year.

"I would've expected some incremental revenue upside," said Matt Adams, analyst with Epoch Partners. "There's not as much news as we would have hoped for. They took three steps back (last month) and half a step forward today."

Virtually all of the improved picture for the bottom line comes from cost cuts, rather than a better sales forecast, Adams said. InfoSpace plans to take a $2 million charge in the first quarter, related to layoffs announced last week. The job cuts will save the company about $20 million in annual operating costs related to InfoSpace's sales force and general and administrative departments, CFO Tammy Halstead said.

The company expects its restructuring plan to save about $30 million overall in annual expenses, said Ed Belsheim, chief operating officer. "From an operations perspective, we are more than ever focused on aligning costs along our strong growth areas," Belsheim said.

InfoSpace predicted a 2002 profit of 9 to 10 cents per share, on revenue of $300 million to $310 million. But 2002 is too far away for any serious prediction, said Keith Bachman, analyst with ABN Amro.

"There are too many things going on in 2002 to read too much into it," Bachman said. "I'm not sure that anything on the conference call will serve as a catalyst for the stock. They're in a little bit of a hole right now."

Shares of InfoSpace traded at $4.34 in after-hours activity on the Island ECN, following the conference call. InfoSpace rose 25 cents to $5 in Monday's regular trading ahead of the news.

Company executives reiterated plans to focus on back-end technology and services, and put fewer resources into businesses dealing directly with consumers. InfoSpace sees wireless technology as its biggest growth area, followed by online commerce.

Wireless business will have more than 5 million registered subscribers by year's end, said CEO Naveen Jain, who sees wireless revenue rising more than 100 percent this year to generate 20 percent to 25 percent of the company's overall revenue. Commerce services also will provide about 20 percent to 25 percent of total revenue, he added.

Also Monday, InfoSpace said former CEO Arun Sarin will resign from the company's board of directors. Jain, who was Sarin's predecessor as CEO, came to back to replace Sarin as part of a recent management shakeup.>