Found this this AM...looks like INSP has LOTS of PR work to do, ad I mentioned in a post last week, before the "blizzard" was announced....This is the lead story in Red Herring today..
redherring.com
January 24, 2001
The revolving door at Infospace
By Dan Briody
Redherring.com, January 24, 2001
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Quote & Chart for: INSP VOD
As investors digested the news that Infospace (Nasdaq: INSP) was losing its chief executive officer, chief operating officer, and chief financial officer all on the same day, it seems that most came to the same conclusion: management defections can mean a lot of things, but rarely are they cause to celebrate.
Investors pummeled the stock on Monday after Infospace announced that Arun Sarin, who was hired just last April as CEO, was stepping down (although the company said he is staying on as vice chairman). The stock plunged 21 percent on Monday and fell another 14.7 percent on Tuesday to close at $6. Mr. Sarin is being replaced by Infospace chairman and founder Naveen Jain, who stepped aside as CEO following the hiring of Mr. Sarin.
In addition, COO Russell Horowitz, former chairman of Go2Net (which was acquired by Infospace last year), is shifting to a new role as executive consultant, and CFO Rand Rosenberg is leaving the company.
Speculation as to the cause of the mass exodus has been running rampant the last two days, and it is likely to continue until the company announces its fourth-quarter earnings on January 29. But of far greater importance is how Infospace will recover from the loss of Mr. Sarin and his extensive contacts in the wireless industry, a highly strategic future direction for the company. Prior to joining Infospace, Mr. Sarin worked for Vodafone Airtouch (NYSE: VOD).
WIRELESS-LESS
For the better part of a year, Infospace has been focused on making its wireless strategy a success. The plan was, and presumably still is, to outsource unbranded portal-like services (content, mobile-commerce, etc.) to wireless service providers, allowing the providers to brand the services themselves. This would allow the providers to maintain the brand relationship with their customers, rather than the alternative of letting something like Yahoo (Nasdaq: YHOO)-branded phones usurp their relationships.
Mr. Sarin's arrival at Infospace last year was seen as key to getting Infospace's foot in the door of major wireless providers. Without Mr. Sarin actively involved in making those deals happen, the prospects for success are considerably dimmer.
"The reaction in the stock is justified, given that they were counting on wireless and Arun Sarin was a key factor in that," said Matt Adams, an analyst at Epoch Partners. "In order to get access to sell to the service providers, you need strong relationships."
By reappointing Mr. Jain to CEO, the company is hoping to limit the damaging effects of the shake-up. But losing three members of a management team that some analysts were already calling "an issue" is undeniably bad news. And don't be fooled by their remaining ties to the company. At least one analyst, choosing to remain anonymous, said Mr. Sarin's and Mr. Horowitz's new titles were a thin veil for a graceful exit.
THE TRUTH IS OUT THERE
We may never know the real reasons for the departures, but the first clues will arrive in one week. Investors are anxiously awaiting the fourth-quarter earnings call next Monday, when the new management will either revise growth estimates for the coming year or reiterate their confidence in the 13 cents a share that analysts expect Infospace to earn in 2001. But analysts weren't waiting around to hear the news, as five different research firms downgraded the stock and at least three lowered earnings estimates for this year.
The most pessimistic among us would jump to the conclusion that executives are deserting because the ship is sinking. They might not be far off. It is rather difficult to imagine Infospace meeting its numbers this year given the economic climate, particularly with a hobbled management team.
And believe it or not, this stock is still not cheap. Even trading at just $6, it still has a lofty price-to-earnings ratio of 46 times 2001 earnings estimates. With so many questions surrounding the stock, it's hard to justify buying it at those levels. Because there are no near-term catalysts on the horizon, it would be best to watch this stock until the second half of this year in order to clear up the management questions and gauge the subscriber growth. Infospace has said that it expected to have 1 million subscribers by the end of 2000, and it will report the exact number in next week's earnings release.
Until then, it looks like Infospace has too many empty spaces through which your money could fall. |
