Friday, April 27, 2007 - Page updated at 12:00 AM

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InfoSpace shareholders to receive $200 million

Seattle Times technology reporter

After being pressured by its largest shareholder, InfoSpace said Thursday it will give back $200 million to shareholders in the form of a dividend.

Investors responded favorably in after-hours trading, sending the stock up to $28.75 a share. During regular trading, the stock had already jumped 70 cents to close at $27.71, a 52-week high.

Last month, Sandell Asset Management, which owns 8.8 percent of the company, questioned how the Bellevue company planned to use the more than $400 million in cash on its balance sheet after its largest mobile-content customer said last year it was pulling its business.

The dividend is part of a settlement the company reached with New York-based Sandell, which was set to stage a proxy fight at the company's annual meeting next month. It planned to nominate three directors and demanded that InfoSpace return cash to investors, cut $15 million in costs and hire a financial adviser to evaluate a potential sale of the business.

Under the settlement, Nick Graziano of Sandell has been appointed to the board immediately.

InfoSpace also reported first-quarter financial results Thursday. It said it lost $500,000, or 2 cents a share, on sales of $86.6 million. The sales figured represented a $3.6 million decline compared with the year-ago period, marking the beginning of the company's withdrawal from the mobile-media business.

For years, InfoSpace had served as an aggregator of ringtones, wallpapers and other mobile content, but last year it learned that its largest mobile-content customer — widely believed to be Cingular Wireless — was not renewing its contract. Instead, the customer wanted to work directly with the record labels.

That announcement sent InfoSpace into a tailspin. It said it would lay off 250 employees and stop investing in mobile content.

It is focusing on its online properties, including the search engine, and on the mobile-infrastructure business. During the first quarter, it renewed contracts with Verizon Wireless and AT&T (the former Cingular), Chief Executive Jim Voelker said during a conference call discussing first-quarter results.

During the period, most of the company's mobile revenues still were coming from content, as it takes time to wind down that business. In the first quarter, mobile revenues totaled $41.6 million, of which only $11.9 million came from its remaining mobile-infrastructure business. That segment grew by $1.8 million from the fourth quarter.

"We are growing revenue, we have reduced costs, attracted new partners and extended key relationships," Voelker said. "These achievements, and renewed momentum and strength from our employee base, make us optimistic about the year ahead."

InfoSpace Chief Financial Officer Allen Hsieh said that as the company exits the mobile-media business, and the company's core mobile business grows, they expect mobile to be profitable by year end.

In the second quarter, the company expects sales up to $72 million, and its net loss to be as high as $5 million, or 15 cents a share. For the full year, revenues are expected to reach $280 million, and the net loss to be as high as $3 million, or 9 cents a share.

The dividend, approved by the board, will be a special one-time cash distribution of about $6.30 a share. Distribution is expected in the next month.

Copyright © 2007 The Seattle Times Company


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