InfoSpace to retreat from consumer business
The content-delivery company's investors will have to wait as long as 30 days to get a better financial picture, as it decides how to cut back on consumer businesses.
In a Monday conference call with analysts, InfoSpace executives said they would release a strategic plan within 30 days, with updated financial targets. The company plans to scale back or sell most of its consumer-oriented units to focus on Internet content and commerce infrastructure services.
"At this point, we have made a very conscious decision to de-emphasize some of the business we acquired with Go2Net," Chief Executive Naveen Jain told analysts.
Shares of InfoSpace traded at $6.90 in after-hours activity on the Island ECN after the conference call. InfoSpace rose 9 cents to $6 in Monday's regular trading ahead of its earnings report.
InfoSpace bought Go2Net last year. Although Go2Net was known largely for its Web portal, InfoSpace mainly eyed the company's technology offerings, said Peter Friedland, analyst with WR Hambrecht, which has a "neutral" rating on InfoSpace.
"I think InfoSpace really wanted Go2Net because it had some broadband portal services in terms of providing video and audio streaming for DSL and cable," Friedland said.
InfoSpace's consumer businesses are profitable and generate the vast majority of the company's overall revenue. But executives view infrastructure and merchant services as their best growth venues, especially given the recent decline in Web content businesses and related stocks.
"What InfoSpace is doing now probably has a lot to do with the state of the market over the last six to nine months," Friedland said.
Executives spent most of Monday's conference call promoting their wireless plans. InfoSpace expects wireless revenue this year to more than double from the 2000 level of about $18 million.
Although InfoSpace plans to release new estimates in 30 days, Chief Financial Officer Tammy Halstead provided projections that call for a loss of 14 cents per share on revenue of $215 million, basically flat compared with 2000 revenue of $214.6 million. That projection--down from InfoSpace's earlier forecast of $360 million in 2001 revenue--assumes no growth from its consumer businesses and no new acquisitions, which fueled much of the company's revenue growth in the past.
InfoSpace expects to improve bottom-line estimates as the company refines its business plan over the next month.
"Obviously it will take us a little while to essentially align our cost structure with the reduced revenue," Jain said.
InfoSpace's shift from consumer businesses comes after a management overhaul that included Jain resuming a role as CEO, replacing Arun Sarim.
"With the management changes, I think this is just a convenient time for InfoSpace to clean house," Friedland said.
InfoSpace reported fourth-quarter net income of $12.6 million, or 4 cents per share, excluding special charges. Twenty analysts surveyed by earnings tracking company First Call predicted a profit of a penny per share for InfoSpace's December quarter.
Including goodwill write-downs and one-time charges, InfoSpace lost $97 million, or 31 cents per share.
Fourth-quarter revenue increased 125 percent year over year to $66.1 million. The company extolled its wireless business, which generated about $8 million in revenue during the quarter.
Merchant services contributed about 30 percent of InfoSpace's fourth-quarter revenue, Jain said.
For the full year, InfoSpace earned $46.2 million, or 14 cents per share, excluding special charges. Including all expenses, InfoSpace lost $279.2 million on 2000 revenue of $214.6 million.