Wall Street pans Infospace management shakeup

Infospace shares fell 21 percent to $7.03 Monday after it announced a complete overhaul of its management team that amounts to a reunion of the company’s original power base.

Chairman Naveen Jain will resume his role as chief executive, replacing Arun Sarin, who joined the company in May from Vodafone-AirTouch and is widely recognized as the leader and architect of Infospace’s expanding wireless business.

Sarin, 45, said he will stay on board as vice chairman of the company’s board of directors and “help in every way possible” with the company’s wireless strategy.

“Yes, this obviously means I will be less engaged in the company that I was as CEO,” Sarin told analysts during a conference call. “But that’s the balance I’ve been seeking between my work and home life.”

In its press release, Infospace said Sarin was stepping down primarily due to family obligations. He and his family live in Northern California, making it difficult for him to stay on top of the company’s day-to-day operations in Seattle.

Chief operating officer Russell Horowitz, who joined the management team following the Go2Net acquisition last year, will be replace by Ed Belheim who previously served as Infospace’s senior vice president and general counsel.

Horowitz will remain with Infospace (Nasdaq: INSP) as an advisor and executive consultant.

Also on the way out is Chief Financial Officer Rand Rosenberg. Rosenberg joined Infospace from Montgomery Securities where he was the founder, senior managing director and partner of the firm's telecom and media investment banking unit.

Tammy Halstead, who previously served as the company’s chief accounting officer, will now take on the CFO duties.

“Tammy’s been with us from the beginning,” Jain said during the conference call. “She built our accounting and finance team and we’re very excited to have her as our CFO.”

This not-so-subtle retrenchment of Infospace’s original management team raised a few eyebrows in the analyst community.

“Arun Sarin has an extensive background in the wireless sector,” said Keith Bachman, an analyst at ANB AMRO. “He’s now elected to take less of a role in the company. Having less commitment from him is a cause for concern.”

Jain said the company wasn’t actively searching for a new CEO but wouldn’t hesitate to hire a qualified candidate.

“I love Arun to death,” Jain said. “I’m hoping that he’ll chill out for a few months and then come back to Seattle.”

Several times during the conference call, Jain said the company needed managers who were willing to "work 16 hours a day, seven days a week" to sustain the company's impressive growth rate.

The return of Sarin or any of the other departing executives, according to at least one analyst, seems highly unlikely.

“They are consolidating their management team into the old Infospace,” said Matt Adams, an analyst at Epoch Partners. “The old guard is back. There are a lot of strong personalities on this management team. But they’ve needed those strong personalities to get where they are now.”

Adams said the revamped management team might also be a precursor to reduced or at least less optimistic sales and earnings expectations in fiscal 2001.

“December’s numbers are very safe,” he said. “The question is how 2001 looks. Will that be the other shoe to drop?”

During Monday’s conference call, Jain refused to comment on the company’s financial outlook, saying those details will be provided next week when the company reports its fourth-quarter results.

First Call Corp. consensus expects Infospace to earn a penny a share on sales of $72.6 million.

Last quarter, Infospace beat the Street estimate when it posted a profit of $9.5 million, or 3 cents a share, on sales of $57.7 million.

Following Monday’s management shakeup, Merrill Lynch analyst Virginia Genereux said in a research note to clients that she believes the company loses "critical management and industry experience" with the diminished roles of Sarin and Horowitz.

At Vodafone-AirTouch, Sarin was responsible for the company's cellular, paging and satellite businesses as well as the global Internet and global technology businesses. Prior to the Vodafone AirTouch merger, Sarin spent two years as president and COO of AirTouch Communications' and two years as president and CEO of AirTouch International.

Infospace shares moved up to a 52-week high of $138.50 in March before falling to a low of $5.44 in December.

All 16 analysts tracking the stock rate it either a “buy” or “strong buy.”