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Search Results in Fatter Profits for IAC

Shares of IAC/InterActiveCorp (IACI), the collection of Internet businesses built by Barry Diller, gained over 4% on Oct. 31, after the company reported higher than expected earnings for the third quarter.

After a dizzying series of acquisitions and divestitures over the past few years -- including the August, 2005, spinoff of its Expedia (EXPE) travel businesses -- IAC operates a diverse stable of Web-based businesses including, Citysearch, Entertainment Publications (publisher of the Entertainment Book), Home Shopping Network (HSN), LendingTree,, and Ticketmaster.

IAC reported over $1.6 billion in revenue for the third quarter, up 11% from a year earlier. The company's adjusted EPS of 35 cents, vs. 32 cents in the 2005 quarter, was 3 cents above the mean estimate of analysts provided by I/B/E/S. EPS based on generally accepted accounting principles (GAAP) for the quarter was 24 cents, vs. 20 cents.

Revenue rose across all of IAC's business units, with U.S. retailing up 3% after flat revenue from HSN. IAC's services sector was up 13% on strength at Ticketmaster, though its mortgage lending arm was sandbagged by weak housing market conditions. Media and advertising jumped 62%, with results paced by strength at the search engine.

Barry Diller, CEO of IAC, noted the importance of to the company in a press release, calling it the "connecting thread" among IAC's businesses. "All our cross company efforts ... allow us to leverage our audience, scale and diversified expertise," he said.

IAC also announced that directors have authorized the repurchase up to an additional 60 million shares of the company's common stock. During 2006, IAC has repurchased 34 million shares at an average price of $26.75, with 8.8 million shares remaining in its current stock repurchase authorization.

The shares gained 4.3% to $31.11 on the Nasdaq in morning trading, just below their 52-week high of 31.50 reached in March.

In an Oct. 31 research note, Standard & Poor's equity analyst Scott Kessler noted that IAC's adjusted EPS was one cent above his forecast. Kessler believes a turnaround at Home Shopping Network is taking shape, and results in the fourth quarter "should be a referendum on changes made earlier this year." For Kessler, "remains a 2007 story," but the analyst has been encouraged by market share gains and promotional efforts at the search engine.

Kessler, who has a strong buy rating on IAC shares, raised his 12-month target price on the stock to $38 from $31.

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