Chief Barry Diller is expecting better times ahead for the company's HSN and Ask.com units.
Poor merchandise choices, including a big bet on fitness products that didn't pan out, hurt profit at IAC's retailing business, the company's largest by revenue. Retailing includes HSN and Cornerstone, a catalog company IAC purchased for $720 million last year.
"I recognize that results, and not rhetoric, are what you are interested in, and that's not going to come in a flash,'' said Diller in an earnings conference call.
Last month, IAC hired former
executive Mindy Grossman to head up its retailing business. The company also hired Rob Gruen to oversee HSN's merchandising operations. The executives are going to "drive the hell out of the business," Diller said.
Diller continues to have faith in HSN, which he believes is well positioned to take advantage of the growth in digital commerce, particularly as high-speed Internet becomes more widely used. Wall Street analysts are more skeptical about e-commerce companies, noting the heightened competition for online shoppers.
IAC had first-quarter adjusted profit of $165 million, or 31 cents per share, on sales of $1.55 billion. Wall Street forecast EPS of 27 cents and revenue of $1.54 billion, according to Thomson Financial.
Retailing revenue rose 28% to $769.1 million because of the Cornerstone acquisition. Sales rose 27% to $482 million in services and 16% to $178.4 million in membership and subscriptions on gains in ticketing and online personals. IAC's media and advertising unit produced revenue of $117.6 million, compared with $9 million a year ago, reflecting the $1.9 billion purchase of Ask.com.
The company expects Ask.com to start paying off for IAC next year after the company ramps up advertising of the search engine. Ask.com, formerly Ask Jeeves, is gaining both market share and positive reviews, including one from the
Wall Street Journal's
Walter Mossberg. It will introduce a news feature to the engine in the next few months.
"We have been able to grow share on really daunting circumstances with
as a verb,'' he said. "I think we can continue to do it."
The recent departure of Ask head Steve Berkowitz to
MSN has concerned some investors. Berkowitz has been credited with helping turn around Ask. Jim Lanzone, a veteran Ask executive, has replaced Berkowitz.
"Steve was definitely an asset to the company and I am sorry that he decided to leave," Diller said. "I'm convinced that we won't skip a beat."