So, That's the Point of This Company
nytimes.com
September 19, 2004
SUNDAY INTERVIEW | WITH BARRY DILLER
By LAURA RICH
BARRY DILLER, the chairman and chief executive of IAC/InterActiveCorp, wowed Wall Street analysts who had come for a conference last fall at his company, an amalgamation of primarily Internet-based businesses. Profits, he said, would rise annually by 25 percent or more, to $3 billion in 2008. Based on that projection, analysts raised their expectations for revenue growth in IAC's important travel division to 41 percent for the second quarter this year.
Unfortunately for Mr. Diller, IAC Travel, which contributes 40 percent of IAC's total revenue, fell short of the forecast by a full six percentage points. On Aug. 5, two days after announcing the bad news, he sent an e-mail message to employees, blaming himself for having "raised expectations too high" the year before.
In an interview last Tuesday, Mr. Diller spoke about projecting financial performance, the confusion that his company's amalgamation provokes and whether, as a former longtime Hollywood executive, he would consider becoming the chief executive at Disney, where the current C.E.O., Michael D. Eisner, has said he will resign in 2006. Here are excerpts from the conversation:
Q. At the November meeting last year, you talked about hitting $3 billion in revenues. What were you basing the numbers on, and why has that failed you?
A. We as a company do not give guidance. And we did not do so at our November investor meeting. What we did do is, we talked about our goals, hopes for growth over the next three years, where we said that we would have a stretch goal of $3 billion in operating income by 2008.
It was, however, a mistake. Because once you say it to the audience of analysts, etc., they interpreted it as guidance. And so, when it came to the second quarter, we had to disabuse everyone of this notion directly. That's what happened. I don't think we're going to make that mistake again.
Q. What will you do instead?
A. If we're going to talk about our businesses, we're going to have to talk about them within the constraints of the disclosure rules, without giving guidance, because we're not going to give guidance, because we don't believe that it is a sensible game to play. For those who think it's not a game, they're at best naïve. There's no way you can predict what is going to happen in six months or two years in most businesses, and certainly not for businesses that are growing at the rate that we have grown.
It's not like you're playing against the rules; it's just like you're saying, "I'm not playing, thank you."
Q. But guidance helps people make investment decisions.
A. And we certainly publish the required information, plus. Frankly, that's about all we should do. Except, for investors and analysts, to meet with them openly once a year at least, and intensively go through our businesses. And other than that, what we really should do is build our businesses.
It's hard to understand us because we're not only in financial services, which we are through LendingTree, but we're in the travel business, through Expedia and Hotwire and Hotels.com, and we are also in electronic retailing through HSN, in the personals business through Match.com, and local services through Citysearch and ServiceMagic and TripAdvisor.
So, it's amazing the number of different businesses we're in that are different from each other, but for us, because they're all doing business interactively, or through the Internet, primarily, that's their commonality.
Q. But how long can that hold as a unique aspect? These days everyone does business on the Internet.
A. We're primarily engaged in businesses that are being transformed by the Internet. We're relatively neutral as to when that transformation takes place, though of course we would prefer it sooner than later. But if you look at our company, our company was formed by being a very early player in those transformations. So, in those businesses that we are in - in the travel business, for instance, which was one of the very earliest businesses to have transformation - we have leadership.
Q. Are you concerned that some people have a hard time seeing the point of InterActiveCorp?
A. No, no. Look, let me be clear. IAC, by the way, is really how we refer to it, but you can call it InterActiveCorp, because we're also known as that, but the diminutive IAC is easier on the tongue. It's not, I don't think, hard to understand our definition, i.e., that we are engaged in businesses that are being transformed by the Internet.
I think, though, that when you have the number of companies and brands that we have that are doing it - ranging from financial services to personals to electronic retailing and so on, and given that those businesses are all different from each other - when you get into the complexity of that, that has been daunting.We think that's reasonable during this period. We think that, over time, this will settle and be much more comfortable for people, because we will have had a record of success that will quiet the early skepticism and concerns about the new interpretations of business.
Q. Is your stock undervalued as a result?
A. I'm not the right person to talk to about the valuation of our company, except to say that our stock is anything but overvalued.
Q. The C.E.O. spot at Disney looks to be coming open. Would you consider the job?
A. The fastest "no." The entertainment business hasn't had a new idea in years.
An extended version of this interview is online: nytimes.com/yourmoney. |
