InfoSpace Finally Sells, At Least Partly (INSP, IAR, GOOG)

InfoSpace (NASDAQ:INSP) has been one of the perpetual old "internet value stocks" that circulated as a takeover stock because of the relative market cap to asset value, but the value was somewhat skewed because the company is no longer profitable and isn’t expected to be for the near future.  Google (NASDAQ:GOOG) never made the company completely irrelevant, but the search functions that were available for free on Google bit into much of InfoSpace’s core operations that it led the pack in before 2002 or 2003 and that it was able to charge large premiums for.

This morning, InfoSpace (INSP) announced it is selling its Switchboard.com and other online directory assets to Idearc, Inc. (NYSE:IAR).  Idearc is paying $225 million from cash and short-term borrowings.  Shares of InfoSpace are up about 24% pre-market at $16.50, still in the lower-end of the $12.56 to $27.76 range over the last year.

unfortunately, InfoSpace hasn’t been profitable and analysts have been looking for losses in both 2007 and 2008.  It is also expected to see declining revenues.  As of June 30, the company had $197.79 million in cash and short term investments and total liabilities of $72.29 million; net tangible assets were listed as $350.89 million.  Its market cap before this was listed as $439.5 million, so an an interpolated basis it would have a new market cap of $550 million.

This is part of the Board of Directors’ ongoing review of our company and the opportunities available to enhance value for shareholders.  Upon completion of the transaction, InfoSpace expects to return the net proceeds from the sale to shareholders as a special cash distribution.  At closing, InfoSpace’s cash position is expected to be in excess of $400 million.

Jon C. Ogg
September 17, 2007