Interesting commentary on INSP from VL... I wonder if the decision to exit the online consumer advertising market translates to the death of SI (presuming that there's no lurking buyers out there somewhere)...
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InfoSpace is undergoing a major overhaul ... . The company has decided to accelerate its exiting of the online consumer advertising market, an industry that has been hit particularly hard by the U.S. economic slowdown, through the discontinuation of its operations in this area during the third quarter. In doing so, management is hoping to free itself of this peripheral business, enabling InfoSpace to focus its full attention and resources on the company's fast-growing merchant and wireless segments. One problem, however, is that the division being closed down accounted for roughly $15 million of revenues in the second quarter, and more than 20% of the company's total sales in the first half of the year.
... As such, we have reduced our top- and bottom-line estimates for 2001. Our revised revenues number for the full year is $165 million, 35% lower than our previous call for the period, and a significant dropoff from last year's sales figure of $255 million. In addition, we expect year-over-year share-net comparisons to be unfavorable in upcoming quarters. At the same time, the company is implementing a restructuring program to reduce its cost structure. Profits may be under pressure until these cost-saving measures take hold. Accordingly, we have lowered our 2001 share-net estimate for InfoSpace to a loss of $0.10.
InfoSpace's stock price is down by more than 60% since our June report. The company's near-term earnings prospects are weak, as we expect the economic slowdown and aforementioned discontinuation of operations to continue hurting business. And, although these shares offer above-average 3- to 5- year price-appreciation potential, the modest earnings gains we project are hardly assured. Note, we have not yet given this stock an Earnings Predictability rating due to its short trading history. In total, we do not recommend making a commitment to these shares at this time, as investors would likely be better served elsewhere.
Daniel L. Marks August 31, 2001
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KJC |
