In Depth: Public Companies Report
From the June 29, 2001 print edition
InfoSpace's 2000 revenues skyrocket while stock free falls
M. Sharon Baker Staff Writer
InfoSpace Inc. was one of the Internet's high fliers.
In the past three years, the company's revenues have skyrocketed from $9.6 million to $214.5 million, thanks in part to a $1 billion acquisition of Seattle-based Go2Net Corp.
But like other stocks in the sector, the Bellevue company, which licenses a broad array of content and infrastructure services to Web sites, cellular phone companies and other technology companies, has cratered.
It's stock has gone from nosebleed territory - it traded at a split adjusted $71 per share a little more than a year ago - to the graveyard, posting a low of $1.50 per share a month or so ago.
InfoSpace's stock has edged up, but not much. It currently trades around $2.75 per share.
Analysts lost confidence in the company, which three months ago had a major management overhaul, a 20 percent staff reduction and a drastic downgrade in revenue expectations for 2001. Rather than posting a profit and generating sales of $350 million, executives have said sales will be flat at $215 million, and InfoSpace will post a small loss for the year.
Such a dramatic downgrade has led shareholders to file a $2 billion lawsuit alleging insider trading and stock dumping, as well as class action lawsuits, several which were filed in mid-June.
Like many analysts, Adam Hamilton, who writes for Seattle brokerage McAdams Wright Ragen, has not followed InfoSpace very closely since the company announced its bad news earlier this year. But nonetheless, he isn't willing to count the company out just yet.
"Companies such as InfoSpace are viewed as losers right now," he said. "Everyone thinks they are on death's door. But they very well may have the last laugh. InfoSpace has money and good cash value flow ... and may rise back from the ashes."
A recent spate of announcements revolving around its broadband business, as well as better than forecast second quarter numbers, has analysts wondering if Info-Space is on the road to recovery.
Founder Naveen Jain, who has retaken the position of chief executive, was not caught flat-footed when advertising revenues stopped flowing so enormously to Internet companies. Although revenue from advertising does generate between 50 percent and 60 percent of InfoSpace's total sales, Jain has always had a vision that his content and services would be distributed via a number of ways.
Jain's team is now feverishly extending its distribution model to the television. It's a move that entails forging alliances with major telecommunications and cable companies, as well as with software makers that create set-top boxes and other software that connects the Internet to the television.
"We're working with all the major players," said Michael Riccio Jr., executive vice president of broadband for InfoSpace. "We're going to be platform agnostic."
InfoSpace wants to license its content and services to other companies who would then sell them to their customers.
InfoSpace doesn't want to be in the consumer space, Riccio said. InfoSpace's broadband team of 40 has landed its first customer, Bloomberg TV. InfoSpace has helped the television news channel add interactive features to its broadcasts. Such features allow viewers to enter their own stock symbols, enabling them to watch personalized tickers streamed over their televisions. Viewers can also call up information on a particular stock and see the news of the day, among other services.
Riccio declined to reveal an average licensing fees, but said that most broadband revenues will involve an upfront development fee and then usage or per subscriber fees as a part of a revenue split.
Analysts predict that there will be some 30 million to 40 million people with interactive television by 2004, Riccio said.
"That's when we'll really start to see the acceleration in our broadband revenues," he added. "We're investing our time and effort today to make sure that when cable companies become buyers. We're sitting here with a suite of services that addresses their needs."
Until then, InfoSpace hopes to ride the wireless wave.
In that business, the company has signed up major phone companies that are using InfoSpace technologies to deliver information and services to phone and wireless device users.
During the company's first quarter, its wireless revenues accounted for 20 percent of sales, or $9.3 million in revenues. Some 2 million subscribers are using InfoSpace's services, up 500,000 from the previous quarter.
But Adams cautioned investors that InfoSpace still has a high valuation - even when trading at $2.75, and that fact, coupled with the weakness in its core business, has him sitting on the sidelines for now.
As more high speed and wireless devices become popular, InfoSpace executives hope to license technology that will let a carrier, say, Verizon, offer its customers a portal or destination whereby they can tie together all of their information and access it through a phone, a handheld device, a computer or a laptop.
InfoSpace will debut a portal or destination to show customers what might be possible in July, Riccio said.
Everyone is moving into broadband, said McAdams' Hamilton.
"The market is promising; it's just not generated ready-for-prime-time revenues or profits," he said. Hamilton gives chief executive Jain high marks for his ambition.
Reach M. Sharon Baker at 206-447-8505 ext. 107 or sbaker@bizjournals.com. |
