InfoSpace Jumps on Takeover Talk
Is InfoSpace (INSP) in play? Shares of the provider of online search and directory services moved sharply higher on May 29 after unconfirmed reports pointed to possible takeover interest in the company.
According to wire-service reports May 29 detailing an account in Spanish newspaper Negocio, LaNetro Zed SA, a Spanish provider of content and applications for mobile phones, may buy Infospace for €800 million ($1.07 billion).
InfoSpace shares zoomed 13% May 29 to $23.30. Shares of competitors Glu Mobile (GLUU), Marchex (MCHX), Miva (MIVA), and Openwave Systems (OPWV) also advanced.
Standard & Poor's equity analyst Scott Kessler pointed out in a May 29 research note that just last month, LaNetro Zed, which like InfoSpace is focused on mobile content and services, raised around €45 million ($60 million) from New York-based merchant bank Veronis Suhler Stevenson to pursue U.S. growth, with Veronis taking a minority stake in Zed. Kessler thinks an acquisition of InfoSpace would be consistent with Veronis's investment strategy, but such a deal might be "too large and problematic".
InfoSpace sidestepped a nasty proxy fight in April by entering into an agreement with 8.8% shareholder Sandell Asset Management by naming a Sandell candidate to the company's board and paying out a $208 million special dividend to its shareholders.
The company's tools and technologies help users with find content and information on the Internet or mobile phone. The company offers search and directory services through its Dogpile.com, Switchboard.com, InfoSpace.com, Webcrawler.com, MetaCrawler.com, and Zoo.com webistes, as well as through partner sites.
InfoSpace operates in a hotly competitive industry and the departure of a key carrier customer, announced in September, 2006, is expected to hurt its revenues and operating results when it occurs at midyear. (The company has not identified the customer although sources cited in a Sept. 21 Seattle Times report indicated that it was wireless carrier Cingular, a unit of AT&T [T].) As a result, the company implemented a plan to reduce its workforce and consolidate its facilities. It also suspended investment in mobile media content and plans to cut back on its mobile media content product offerings by mid-2007. The company recorded an aggregate restructuring charge of $62.7 million in fiscal 2007.
Still, the company outlined some positive developments in announcing fiscal first quarter results on Apr. 26, including partnerships with AT&T, Vodafone, and Google. The company supports AT&T's MEdia Net Service, and provides the telecom giant with customized mobile search and messaging solutions, as well as professional hosting and management services.
"Although mobile media revenues declined as expected, revenues from our core online and mobile businesses showed strong sequential increases and generated strong cash flow," said InfoSpace CEO Jim Voelker in the company's Apr. 26 earnings release. "The recent announcement of several key partnerships including AT&T, Vodafone's SFR, and Google reflect our strength and give us good reason to be optimistic for the year ahead."