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R.H. Donnelley Will Buy Business.com; Shares Fall

R.H. Donnelley Corp., a publisher of Yellow Pages phone directories, agreed to buy search engine Business.com for $345 million and said the move may delay a dividend, sending the shares down the most in eight years.

Business.com, based in Santa Monica, California, has 100 employees and will have revenue of $50 million this year, R.H. Donnelley said in a statement today. Cary, North Carolina-based Donnelley also reported second-quarter profit that missed analysts' estimates.

``To the extent that this acquisition delays the ability for the company to pay a dividend, that, I think it disappointed some of the shareholders,'' said Mark Bacurin, an analyst at Robert W. Baird & Co. in Nashville, Tennessee, who rates the shares ``outperform.''

The purchase of Business.com follows the takeover of Dex Media Inc. last year and gives R.H. Donnelley technology to improve advertising sales at DexKnows.com, an online local- search site started in June. Business.com serves more than 6,000 business-to-business advertisers, the company said.

``The general perception is that the phone directory industry is a dying industry,'' Bacurin said. ``R.H. Donnelley is better positioned to take advantage of the growing online industry.''

Shares of R.H. Donnelley fell $6.41, or 8.8 percent, to $66.67 at 4 p.m. in New York Stock Exchange composite trading, the biggest drop since October 1998. They have gained 6.3 percent this year.

Interactive Unit

Jake Winebaum, chief executive officer of Business.com, will become president of R.H. Donnelley's interactive unit, which also includes LocalLaunch!, a search engine the company bought last September. Through Dex, R.H. Donnelly has partnerships with Google Inc., the most-used search engine, and Yahoo! Inc., owner of the most-visited set of U.S. Web sites.

The acquisition may delay any dividend by as many as two quarters, Chief Financial Officer Steven Blondy said on a conference call today. The company discontinued its quarterly dividend in March 1999.

R.H. Donnelley posted second-quarter net income of $24.9 million, or 34 cents a share, compared with a year-earlier loss of $79.8 million, or $1.15 a share. Eight analysts in a Bloomberg survey on average anticipated profit 43 cents a share, while 10 analysts in a Thomson Corp. survey estimated 41 cents.

Sales climbed 54 percent to $666.6 million.

To contact the reporter on this story: Katie Hoffmann in New York at khoffmann2@bloomberg.net

To contact the editor responsible for this story: Jennifer Sondag at jsondag@bloomberg.net.

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