Diller’s IAC Presents Mixed Picture

A 60-percent jump in online travel revenue at e-commerce empire InterActiveCorp. (IAC) helped reinforce why its leader Barry Diller paid so much attention to that particular sector. But the costs of building that empire has clouded its outlook.

In reporting its third quarter profits of $18.7 million, or 2 cents per share, IAC said its net revenues increased 36 percent to $1.61 billion from $1.19 billion a year ago, helped out primarily by a 60 percent jump in travel-related revenue of $734.3 million.

The results were a far cry from a loss of $36.6 million, or 8 cents per share in the same period a year ago.

Over the last 12 months, Barry Diller has built IAC into a major player in Internet commerce that also focuses on electronic ticket sales, e-tailing and online personals. But it is the travel and travel-related deals of its IAC Travel division, which includes Expedia, Hotels.com and now Hotwire and Anyway.com, that have added fuel to its growth engine.

InterActive’s electronic retailing division grew 17 percent to $526 million, ticketing jumped by 10 percent to $177 million, and it saw a 44 percent increase to $48.3 million in its personal ads marketplace.

But IAC’s next quarter could be clouded by additional charges from Hotels.com’s contract termination with rival Travelocity. In addition, the company said it would see an additional $2 million costs dating back to its acquisition of uDate.

During a conference call Wednesday to discuss the company’s results, IAC Chairman and CEO Barry Diller said he expected operating income before amortization would be between $1 and $1.2 billion in 2004. On the heels of a buying spree of e-commerce companies, however, Diller also signaled that IAC may be done with acquisitions for the near future.

Of most concern to analysts was IAC’s forecast that full-year financial results would be below Wall Street’s consensus estimates. The company is blaming the shortfall on $11.3 million it incurred from buying back debt, and writing down some investments in software, ending a satellite contract and shutting down a home shopping television venture in Italy.

IAC is forecasting adjusted earnings of between 72 and 75 cents a share, while Wall Street was expecting 77 cents. GAAP-based earnings are expected to be between 2 and 5 cents per share.

The news that IAC is not likely to live up to financial analysts expectations sent the company’s share lower. In afternoon trading Wednesday, shares were down close to 12 percent to $32.64.

In a separate development, IAC said it has received anti-trust clearance from the Federal Trade Commission to acquire Hotwire.com for $665 million. The deal closed today.

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