October 24, 2012 / 8:29 PM / 6 years ago

UPDATE 3-IAC results beat expectations but shares slump

* Q3 adjusted EPS 71 cents vs Wall St view 66 cents
    * Revenue up 38 percent, beats analysts' forecast
    * Shares were halted and some trades canceled
    * IAC said FactSet misinterpreted regulatory filing
    * FactSet issued a correction

    By Jennifer Saba
    Oct 24 (Reuters) - IAC/InteractiveCorp easily beat
quarterly expectations on the strength of its search business
but its shares slumped, which the company said was due to a
misinterpretation of its forecast by FactSet Research Systems
    A research analyst noted though that investors could be
disappointed in the outlook, which depicted decelerating search
revenue growth.
    IAC executives said during an earnings call that they are
expecting modest sequential search revenue growth in the fourth
quarter versus the third quarter, which was up 43 percent.
    "Maybe they were hoping for a little bit more," said James
Dobson, an analyst with Benchmark Co.
    Still, for the third quarter, Barry Diller's IAC, a holding
company for search, dating and media websites, said on Wednesday
that revenue increased 38 percent in the third quarter to $714.5
million. Analysts had expected revenue of $692.8 million,
according to Thomson Reuters I/B/E/S.
    Adjusted for tax benefits and one-time items, IAC reported
earnings per share of 71 cents, beating analysts' forecast of 66
     However, shares of the company were whipsawed - rising as
much as 3 percent then falling as much as 14 percent - resulting
in a halt in trading. Nasdaq canceled trades in IAC that were
made while trading was halted. 
    During a conference call with analysts, IAC executives
attributed the drop to an error in FactSet's interpretation of
the forecast in IAC's 8-K regulatory filing. 
    "FactSet recognized an error and promptly issued a
correction," said a FactSet spokesman.
    FactSet is a financial information company that provides
market data and is a competitor to Thomson Reuters 
    IAC shares closed down 8.4 percent at $48.00 on Wednesday. 
    Analysts commended IAC, which houses a host of internet
properties including Ask.com and Match.com.
    "Search overall was very good," said Sean Kim, an analyst
with RBC Capital Markets. "A lot of the beat was largely driven
by the search segment."  
    While not included in third-quarter results, IAC bought the
About Group, a website that publishes specialty articles on
topics ranging from personal finance to pets, from the New York
Times Co for $300 million in September.
    At its media properties, IAC's operating loss widened to
$13.2 million, from $2.8 million during the same period a year
ago, mainly because of weakness at Newsweek Daily Beast.
    IAC released an 8-K filing on Wednesday that estimated an
operating loss at its "media and other segments" that include
Vimeo, College Humor, Newsweek Daily Beast and Hatch Labs, in
the range of $28.2 million to $33.2 million in 2013.
    "It's not as if we are taking the money and dropping the
money into the ocean and see it sink," said Chairman and Senior
Executive Barry Diller on the call, referring to IAC investing
in its media properties. 
    IAC said last week it would cease the print version of
Newsweek at the end of the year and go all digital.
    "We know the results of that will dramatically decrease
losses in the future," Diller said.
    But while IAC has "real enthusiasm" for the digital edition
of Newsweek, Diller said they are realistic. 
    "We have no stars in any of our eyes. Our plans for next
year or any year forward are not going to relate in any material
way from the results of Newsweek." 
    IAC's net income fell to $40.7 million, or 43 cents per
share, from $65 million, or 69 cents per share, in the same
quarter last year.
    The company was helped last year by tax benefits associated
with its investment in European dating site Meetic.
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