IAC's 3Q revenue slowdown causes stock to plunge

IAC's 3rd-quarter revenue misses analysts' targets, management sees 4th-quarter sales drop

Associated Press

NEWS: IAC/InterActiveCorp's third-quarter earnings more than doubled, but the Internet company predicted a decline in revenue for the current quarter. The New York company's stock slid in after-hours trading Tuesday.

DETAILS: The weak revenue forecast for the October-December quarter surprised investors. The end of the year usually brings in more advertising as merchants try to connect with holiday shoppers.

In a Tuesday conference call with analysts, IAC linked the weakening revenue to a downturn in average ad prices at Internet search leader Google Inc., a key partner for the company's Ask.com search engine. Google has been distributing ads tied to the requests entered into Ask.com's search engine for the past decade.

Google's average ad prices have been declining for the past two years as more online traffic shifts to the smaller screens of mobile devices, but IAC said a series of recent changes have hit Ask.com particularly hard. Even so, Ask.com's average ad price — known in the Internet industry as "cost per click" — remains two times higher than two years ago, according to IAC.

Besides Ask.com, IAC also owns several other prominent online services, including Match.com for dating, About.com for reference and Vimeo.com for video.

NUMBERS: Net income climbed to $96.9 million, or $1.13 per share, in the quarter. That was up from earnings of $40.7 million, or 43 cents per share, at the same time last year. The average analyst forecast had predicted earnings of 75 cents per share, according to FactSet.

Revenue rose 6 percent to $756.9 million, trailing analysts' projections by $44 million. The company had posted revenue of $799 million in the second quarter.

FUTURE: In its conference call, IAC indicated that its fourth-quarter revenue will be 4 percent to 6 percent below the third-quarter figure. That implies fourth-quarter revenue of $711 million to $726 million, a decline from $765 million at the same time last year.

Analysts had been anticipating revenue of $851.5 million in this year's final quarter.

STOCK: IAC's shares plummeted $7.63, or 13 percent, to $50.27 in extended trading. The stock had touched a new 52-week high of $58.06 in Tuesday's regular trading session. The shares have traded as low as $38.20 during the past year.

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