IAC/Interactive Takes a Tumble

Shares move lower on expectations of flat free cash flow in 2007.
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Shares of

IAC/InterActive

(IACI)

slipped Tuesday after the company announced it would take a $200 million pretax charge this quarter while expecting free cash flow to be roughly flat in 2007.

The announcement came in a midquarter conference call for investors early Tuesday afternoon.

Shares of IAC were recently off $1.52, or 4%, to $36.48.

The company also said that while it was confident about recent executive changes made to its HSN home shopping network, profit growth would likely remain flat or edge up only modestly in 2007.

"We now have a true retail leader who is known for her energy and her expertise," IAC CEO Barry Diller said of Mindy Grossman, the current head of HSN appointed earlier this year. "This time this is as serious an effort as we can put into it."

Diller also said he does not anticipate that IAC will make any divestitures in the short term. HSN will become more of a cornerstone in the conglomerate's strategy as televised and online media converge, he said.

And despite the company's considerable cash reserves, IAC does not expect to make any "big-ticket" acquisitions in the near term either, Diller said, leaving the door open for smaller bolt-on deals. Additional share buybacks remain a possibility, he said.

IAC continued to emphasize that Ask.com -- an IAC-controlled search engine that has 5.9% market share, according to researcher comScore -- continues to play an increasingly important role as the glue that binds its various holdings together.

Ask.com, which Diller said was already running a profitable operation, continues to roll out new services. On Tuesday's call, Diller guided listeners to AskX.com, a new search engine the company introduced that combines searches with new tools to navigate and preview results.

The new service comes only about two weeks after Ask.com debuted AskCity, a local search engine that draws on the proprietary content of IAC properties such as Ticketmaster and CitySearch as part of its results.

Diller said he lacked a metric to track the progress of AskCity since its high-profile launch in the beginning of November.

Diller said Ask.com will also grow to incorporate a financial site -- which could tap content from IAC holdings like LendingTree and RealEstate.com -- as well as a news site. He also said the company is serious about adding more content properties, and pointed the IAC's acquisition of the popular CollegeHumor.com earlier this year.