Stock in Barry Diller's e-commerce conglomerate took a hit Wednesday after he lowered the earnings forecast for his InterActiveCorp.
Diller blamed several unexpected charges and expenses across many of the company's recently acquired businesses in online travel and mortgage lending that are still being remolded to fit InterActiveCorp.
"We're near the end stage of integrating all these businesses, so this will settle itself down relatively quickly," said Diller. "But our overall model is completely sound."
Analysts were expecting IAC to generate operating income of 77 cents a share for the full 2003 fiscal year. Instead, the company, which is now midway through the fourth quarter, said it will be more like 72 to 75 cents. Shares plummeted 14 percent Wednesday before closing at $34.19, down 8 percent or $2.81.
IAC exceeded analyst forecasts for the quarter that ended Sept.30, the company reported Wednesday. Net income was $18.7-million, or 2 cents a share, compared with a loss in the year-ago quarter of $36.6-million, or 8 cents a share. Revenues were $1.6-billion, up from $1.2-billion.
A star performer was Diller's Home Shopping Network, the TV shopping operation based in St. Petersburg. Network revenues rose 17 percent to $526-million, up from $450-million. Operating income was $34-million, up from a loss of $20-million in the year-ago quarter when HSN was writing down investments after pulling out of several ill-fated ventures in Europe.
This marked the third consecutive quarter that HSN has taken market share from its biggest rival, QVC, domestically, Diller said. He said the network will invest "heavily" next year enhancing customer service. It still lags behind QVC in measures such as average delivery time and average wait time for calls to be answered.
Unexpected charges and expenses totaled about $11.3-million in IAC's other far-flung businesses during the third quarter.
One of the biggest was heightened advertising expenses at Diller's Hotels.com, which shifted from appearing on the Travelocity Web site to Diller's own Expedia Web site. Added advertising has yet to offset the business lost by the switch, a problem expected to linger until 2005.
Other unexpected problems were the cost of terminating a satellite contract at IAC's TV travel shopping channel in the United Kingdom, which was recently reorganized under the control of executives from Expedia. IAC also paid a premium in buying back $59-million in unsecured debt. IAC also spent $717-million buying back 20-million of its own shares in a stock repurchase plan. The IAC board has authorized repurchasing and retiring up to 50-million more shares.
