(Corrects spelling of Welch's name after 15th paragraph in story that was published yesterday.)

Nov. 5 (Bloomberg) -- IAC/InterActiveCorp, whose shares have dropped 14 percent this year, will split into five publicly traded companies, dismantling a media and Internet conglomerate Barry Diller spent more than a decade assembling.

The five companies will be the HSN home-shopping network; Ticketmaster; the Interval International vacation timeshare service; LendingTree mortgages; and IAC, which will include the Ask.com search engine, the New York-based company said today. Diller will remain chief executive officer of IAC.

Profit at HSN and the LendingTree mortgage unit has slumped on slowing consumer demand in the face of higher housing, food and fuel costs. IAC rose 7.5 percent in trading on the Nasdaq Stock Market, the most in three years, on investor optimism that the divisions will thrive on their own.

``It reduces complexity in a business that never should have been aggregated in the first place,'' said Scott Devitt, an analyst at Stifel Nicolaus & Co. in Manassas, Virginia. ``It's a huge positive.''

IAC climbed $2.22 to $31.84 at 4 p.m., the biggest jump since November 2004.

The heads of the four divisions will continue to lead their respective companies, which will have separate boards and chairmen. Along with his role at IAC, Diller will serve on the boards ``of one and maybe two'' of the new companies, he told analysts and reporters at IAC headquarters.

The spinoffs, to be completed by the third quarter next year, are designed to be tax-free to shareholders, who will retain 100 percent of equity in all five companies.

Sixty Brands

IAC expanded to more than 60 brands since Diller, the former head of Paramount Pictures, purchased a 20 percent stake in Silver King Communications in 1995. Silver King was controlled by John Malone's Tele-Communications Inc., the nation's largest cable company at the time.

During the past 12 years, Diller has bought USA Networks, travel site Expedia and other brands, changing the name of the parent company several times as his emphasis changed and he sold or spun off units.

Diller built the current IAC in a series of deals between 2002 and 2004 after selling off USA and other cable channels to Vivendi and buying Ask Jeeves Inc., now Ask.com, in 2005 for $1.96 billion. In 2006, he started a programming unit to acquire and develop Web sites that derive revenue from advertising.

Diller said it was the size and complexity of managing so many brands that drove the breakup.

`Being Superficial'

``We were in so many business sectors and we were so young as a company,'' he said. ``Essentially, you end up being superficial in almost everything.''

IAC's shares have been trading below their true value due to a ``conglomerate discount,'' he said. IAC's structure ``has been confusing to every constituency and, certainly, confusing to the market,'' he said.

Standard & Poor's cut its credit rating for IAC to BB, two steps below investment grade, and may lower it further.

IAC will compete against several larger peers with more money, such as Google Inc. and Yahoo! Inc., without the support from other existing IAC businesses, Andy Liu, an S&P analyst, wrote in a note today.

Jack Welch

The breakup has been under consideration for the past few months, and the board was told of the plan about four weeks ago. Diller said he also consulted with former General Electric Co. CEO Jack Welch.

``He had a lot of questions but thought it made sense,'' Diller said.

Liberty Media Corp., which controls almost 60 percent of IAC and has granted Diller voting privileges for its stake, didn't instigate the breakup, Liberty Chief Executive Officer Greg Maffei said today.

``Barry has been seeking ways to increase shareholder value,'' Maffei said in an interview. ``He's trying to make these businesses more focused, better capitalized, and let them be better recognized by the market.''

Malone, who is chairman of Liberty, has been exploring ways to sell his position in IAC, including a possible transaction involving HSN. The shopping network's slumping performance had made it difficult to agree on terms, Malone told analysts Sept. 21.

Liberty Media

Liberty believes its shares are undervalued because it owns minority stakes worth $1 billion or more in about a half-dozen other companies that it doesn't control, Maffei said then.

Diller told CNBC today that a purchase of HSN by Malone remains a possibility.

The breakup should make it easier for the new companies to buy and sell brands since the deals won't affect the entire operation, said Jean-Luc Nouzille, a portfolio manager at Bristlecone Value Partners LLC in Los Angeles that owns IAC shares.

IAC's holding-company structure and stock-option policies have hurt recruiting efforts, convincing executives they would be better off at startups, said John Barrett, managing director of media-industry executive search at headhunter Cook Associates Inc.

Executive Recruitment

``In the last six months, we've had three or four candidates who weren't attracted to IAC because they thought it lacked focus,'' said Barrett, who's based in Burlington, Massachusetts.

IAC said it will retain control of more than 30 Internet brands and most of the company's cash.

Third-quarter net income fell 4.2 percent as LendingTree had a 41 percent drop in revenue. Doug Lebda, IAC's president, said LendingTree should be recovered by the time it spins off next year.

``It's been a leader in its space,'' Lebda said in an interview. ``We have plenty of time to make sure it's OK.''

IAC also today announced a five-year, $3.5 billion deal with Google Inc. that extends Google's contract to sell Ask.com's search terms and advertising. Google will now sell ads across all of IAC's sites, Diller said.

Google spokesman Matt Furman declined to comment.

To contact the reporter on this story: Oliver Staley in New York at ostaley@bloomberg.net; Tim Mullaney in New York at Tmullaney1@bloomberg.net.

Last Updated: November 6, 2007 02:50 EST