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Tuesday, October 16, 2007 - Page updated at 12:00 AM

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InfoSpace narrows focus to online search

Seattle Times technology reporter

In the past month, InfoSpace has sold two of its business units for a combined $360 million in cash, as the company officially exits the mobile business to focus on Internet search.

On Monday, the Bellevue-based company sold its mobile operations, a unit that helps wireless carriers provide virtual storefronts and search services on mobile phones.

Durham, N.C.-based Motricity, which is in a similar business, paid $135 million in cash for the unit and plans to keep most of InfoSpace's 220 employees in Bellevue, Motricity Chief Executive Ryan Wuerch said.

Last month, InfoSpace sold Switchboard.com, an online yellow- and white-pages business, to Dallas-based Idearc for $225 million in cash.

The sales, when closed, will leave InfoSpace with its online search services, including Dogpile.com.

"With these transactions, InfoSpace will be solely focused on online search," said InfoSpace CEO Jim Voelker.

InfoSpace expects to have about $550 million in cash when the sale to Motricity closes, in about three months. Voelker said the company will return a significant amount of the money to shareholders in a special dividend.

During the past month, Voelker has contended that the public markets have undervalued InfoSpace. Its image and business were hurt last year when its largest mobile-content customer — widely believed to be the former Cingular Wireless — did not renew a contract involving the sale of ringtones. That prompted InfoSpace to sell off its mobile-content business and lay off 250 employees. It also returned $200 million in a special dividend to shareholders after it received pressure from investors to do something with its sizable cash balance.

"We were seeing the value of our assets at 50 percent less than what we thought they should trade at," Voelker said. When both sales close, he added: "We've sold 40 percent of our revenue for $360 million in cash."

On Monday, InfoSpace's stock rose $1.65 a share to close at $19.78. At that price it has a market capitalization of $656 million, or about 54 percent higher than a month ago when the stock was trading at about $13 a share.

Voelker said InfoSpace will now focus on growing the online business, which has been overlooked by executives focused on running multiple business units. He said the company could consider going private.

"Time will tell on that," he said. "Nothing specific is going on, but we'll always look at everything."

As for Motricity, with InfoSpace's list of clients, it will now serve 11 of the top 13 carriers in North America, adding T-Mobile USA and Verizon Wireless, and will manage $1 billion in gross mobile content sales.

As a private company, it raised capital from well known investor Carl Icahn and Advanced Equities.

Motricity will take over three of InfoSpace's five floors in a Bellevue office building, and has named InfoSpace Executive Vice President Steve Elfman as Motricity's president and chief operating officer.

"Ninety percent of this transaction was because of the people at InfoSpace mobile," said Motricity's Wuerch. "That is the impetus of this transaction — because of how strong the employees and technology are. Over the course of the coming months, a detailed integration will happen and there will be a strong presence in the Seattle/Bellevue area and in the Research Park area [of North Carolina]."

Wuerch would not comment on whether Motricity was positioning itself for an initial public offering. He said the company raised $50 million more than what it needed to purchase InfoSpace. Excluding this round of capital, the company had raised $220 million since being founded in 2001.

Tricia Duryee: 206-464-3283 or tduryee@seattletimes.com

Copyright © 2007 The Seattle Times Company

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