Pia Sarkar
SAN FRANCISCO -- Shares of IAC/InterActiveCorp(IACI Quote - Cramer on IACI - Stock Picks) slumped Wednesday after the Internet conglomerate posted a fourth-quarter loss, missing Wall Street estimates, as the company's LendingTree division suffered the biggest blow from a shaky housing environment.
Chief Executive Barry Diller nonetheless continued to back LendingTree, calling it a low-risk player that has had very little loss on loans. "I guarantee one thing: The brand is solid," Diller said in a conference call with analysts Wednesday. IAC posted a loss of $369.9 million in the fourth quarter, or $1.31 a share, in sharp contrast to a profit of $15.3 million, or 5 cents a share, a year ago in the same period. Excluding charges and one-time items, IAC would have made 46 cents a share, still below analysts' estimates of 55 cents. Fourth-quarter revenue grew to $1.86 billion from $1.72 billion a year ago. Analysts had expected revenue of $1.83 billion. LendingTree's revenue, however, dropped 55% to $52.1 million from $115.4 million a year ago. Diller said it will take a while for the division to rebound. "I don't think it'll happen this year or next but it's going to earn back everything that was invested in it," he said. Shares of IAC were down $1.10, or 4.5% to $23.45 in recent afternoon trading. The company is moving ahead with its plans to spin off four of its units: LendingTree, the Home Shopping Network, Ticketmaster and Interval. The remaining businesses will be folded into a new IAC division. How far IAC will get with those plans will be largely contingent on the outcome of a lawsuit filed by Liberty Media(LCAPA Quote - Cramer on LCAPA - Stock Picks), which has a 62% voting control in IAC, but owns only about 30% of the conglomerate. Liberty has accused Diller and IAC's board members of violating their fiduciary duty. It also argues that the spinoffs would dilute its voting control over IAC's operations. Diller on Wednesday continued to blast the lawsuit. "It is of course an unfortunate situation," he said. "I wish Liberty didn't raise the roof on this but they have." The case is expected to go to trial on March 10. Diller said the spinoffs could get pushed back by a month, but conceded that it could take longer than that. Diller is hoping to optimize each of IAC's divisions by allowing them each some autonomy. He also said the spinoffs will allow the divisions to better focus on advertising revenue in niche markets. IAC's Interval division got a boost in revenue in the fourth quarter because of a $17.5 million contribution form ResortQuest Hawaii, which it acquired last May. Ticketmaster saw a record increase in ticket volumes, which drove up sales by 17%. Domestic revenue grew by 14% and international revenue grew by 54%, or 42% excluding the effects of foreign exchange. The Home Shopping Network saw only a slight increase in revenue in the fourth quarter (as reported now as a spinoff). Diller expressed disappointment in Cornerstone, a Web and catalog business that IAC acquired in 2005 and hoped to integrate with the Home Shopping Network. "We don't see that integration," Diller said. "In truth, the catalog business is the kind of business that is not rhythmically relatable to HSN. We do not think that Cornerstone is a core asset of the company." For IAC's remaining businesses like Citysearch, Evite, Match.com and ServiceMagic, which are all lumped under one division, revenue grew by 21% in the fourth quarter. When asked whether IAC would be interested in acquiring AOL, whose Internet access business Time Warner(TWX Quote - Cramer on TWX - Stock Picks) on Wednesday said would be separated from its Web portal and online advertising components, Diller said probably not. "I think we would much prefer to concentrate on what we're doing in search and advertising," he said. "If AOL came down in price to something ridiculous, we'd take a look at it but I don't think that's going to happen."
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