Shares of the New York-based Internet conglomerate have slumped more than 45 percent over the past five years because investors have a difficult time understanding the company. During the same time, the Nasdaq Composite Index rose more than 14 percent.   Even with the recent run-up in its stock price, most analysts rate the shares a hold.  The reason is that IACI is among the most confusing companies in the Fortune 500.

For instance,  would the 19 million or so unique US monthly visitors to the dating site Match.com also invite their dates to a party using IACI’s Evite site, which attracts 14 million visitors?  Maybe.  Would they bond over an article they read on the company’s Daily Beast site?  Perhaps.  Odds are slim. though, that they would ever discuss the bargains they found on the company’s ecommerce site Shoebuy.com, which gets about 1.4 million visitors.

Therein lies the challenge facing Greg Blatt, who Diller recently named as his replacement as CEO.   He has to figure a way to make sense of the company that Diller cobbled together through countless acquisitions, some of which such as College Humor, were baffling.   Even Diller has admitted  that the conglomerate model didn’t always work.

Expedia Inc. (NASDAQ:EXPE) was spun off in 2005.  The travel site’s shares rose more than 17 percent at the same time IACI’s fell.  Two years later, it let go of HSN  Inc.  (NYSE:HSN), Ticketmaster, Interval and LendingTree.  Now, the company will probably have to unload or spin-off even more websites for its stock to continue growing. Shares are up more than 60 percent this year as Diller resolved his long-running ownership dispute with John Mallone and IACI saw a rebound in online advertising.

When Diller acquired Ask.com, formerly Ask Jeeves, in 2005 for about $1.85  billion, the company hoped to turn it into a genuine competitor to Google.   That obviously didn’t happen.  According to the latest data from comScore, Ask had 3.6 percent of the search market to Google’s 66.3 percent. In November, IAC waved the white flag and cut 130 engineers and shuttered work on proprietary search algorithms.   Ask.com is trying to develop its question and answer service though its hard to see the point.

IACI also has countless obscure sites CursorMania, which offers free funky cursors,;  Smiley Central, which offers users a  library of 12,000 smileys,;  and the recently launched Proust, a site that is a “place for families and close friends to share the stuff that really matters.”   There are derivations of the succesful Match.com dating site such as BBPeopleMeet.com (for admirers of big and beautiful singles) and the online dating site Singlesnet.com.

For now, IACI is succeeding in spite of itself.  That can’t last.

–Jonathan Berr

"Somebody, Help Me!!! Please!!!"

If you thought that the SIRIUS XM Radio Inc. (NASDAQ: SIRI) situation couldn’t get more complex, it could. It has.  Reports of it getting ready for bankruptcy, and then getting a controlling debt investment from EchoStar Corp. (NASDAQ: SATS) and Charles Ergen only made matters worse.  And now this morning comes reports that SIRIUS XM is in talks with Liberty Media Interactive (NASDAQ: LINTA).

Dare we bother throwing in that an activist shareholder is still trying to go after the company?  John Malone could come to the rescue here.  But with all the restructuring that has been seen in Liberty and with all of the issues in the media world right now, he might have more than hesitation.  And raising cash to do this with other people’s money is less of an option today.

Liberty is already majority owner of DirecTV (NYSE: DTV), and it already has a relationship with SIRIUS via XM.  The structure of this gets extremely complicated.  There is no talk yet of what the dollar amounts might be, what happens to existing shareholders of the common stock andwhat happens with upcoming debt maturities.

We listed Mel Karmazin as a CEO that needs to go.  We were credited as using price as the only metric for the call, and that could not have been further from the truth.  Karmazin’s buyout of XM took far longer than expected and the companies both stayed on a path that did not make them financially viable.

If SIRIUS goes into Chapter 11, common stockholders will get more comfort that their share certificates will sell on eBay and they can make money on the shipping and handling in the auction.  They are already trading as though they are nothing more than a warrant with a strike price that is almost impossibly out of the money.

Satellite radio’s future, at least as far as the SIRIUS XM of today, is challenging.  The service will survive.  But the common holders have more than just a few worries.

Jon C. Ogg
February 12, 2009

The estimates from First Call for the online and off-line media company are $0.55 EPS on $1.83 billion in revenues.  Estimates for next quarter are $0.36 EPS an $1.57 Billion in revenues and estimates for fiscal 2008 are $1.80 EPS on $6.82 billion in revenues.

Analysts have an average price target north of $33.00.  We are not really relying on options as a predicting tool because of the developments in the infighting that has come up and because of the pending break-up of the company. If we were looking at options as a tool today with static prices, we say options traders were expecting a price move of up to $1.00 to $1.25 in either direction.

This stock is up from its recent lows of $23.30 in January, but we’d take note that until this last bounce it has looked like one rolling low after another fake-out recovery.  The current prices are important as the 50-day moving average is $26.31; its 200-day moving average is $30.03.  Keep an eye on those as these numbers will likely change slightly by Wednesday.

Shares were just downgraded to Hold at Stifel Nicolaus on Monday morning over the current fate being questioned.  We actually have IAC/Interactive up for formal review right now for our own Special Situation letter, and once we have the revenue figures out of each unit we’ll be making a formal report for subscribers on this.

IAC/InterActiveCorp’s 52-week trading range is $23.30 to $40.99.

Jon C. Ogg
February 4, 2008