IAC Rises as Google Effect on Search Results Called Temporary

IAC/InterActiveCorp, the owner of websites from Match.com to Newsweek/Daily Beast, rose to the highest in six months after saying its search business is overcoming the effects of a policy change by Google Inc. on search results.

IAC climbed 1.1 percent to $47.57 in New York, the highest closing price since Nov. 1. The shares are little changed this year, compared with an 11 percent gain for the Standard & Poor’s 500 Index.

A recalibration of the algorithm Google, the biggest search-engine company, uses to find relevant websites caused IAC properties such as Ask.com and About.com to appear lower in results last quarter, hurting ad sales, Chief Executive Officer Greg Blatt said today on a conference call. IAC’s adjustments are moving its sites higher in the rankings, he said.

“We expect overall improvement throughout the year,” Blatt said. “The policy changes do bring down our short-term growth rates, and we’ve been clear about that, but we will grow nicely nonetheless.”

IAC has expanded its search business, focusing on question-and-answer sites with the $300 million acquisition of About.com from New York Times Co. last year. The search division’s sales last quarter rose 16 percent to $397.2 million, including $31.3 million from About.

Sales climbed 16 percent from a year earlier to $742.2 million, IAC said yesterday in a statement, below the $757.3 million average estimate of analysts, according to data compiled by Bloomberg.

“A lot of people are worried about search, particularly toolbars,” said Kerry Rice, an analyst at Needham & Co. in San Francisco. “The revenue per query seemed to be down.”

Net income climbed to $53.6 million, or 61 cents a share, from $34.5 million, or 38 cents, a year earlier, the New York-based company said. Profit excluding some items was 83 cents a share, beating the 68-cent average estimate of analysts.

Newsweek Drag

The media portion of the business, which includes publisher Newsweek/Daily Beast Co., had an operating loss of $8.8 million in the period -- the first full quarter with Newsweek’s magazine out of print. That compares with a $24.6 million operating loss in the fourth quarter, which included $7 million in restructuring expenses to shift Newsweek from a print magazine to a digital-only publication. IAC doesn’t provide figures for Newsweek specifically.

IAC Chairman Barry Diller regrets buying the magazine, he told Bloomberg TV this week.

“It was a mistake.” Diller, 71, said in a Bloomberg Television interview. Publishing a weekly magazine when news has become instantaneous is “a fool’s errand,” he said.

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