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MARK ALBRIGHTIAC/InterActiveCorp took a beating in late trading even though Home Shopping Network revenues are up.
Shares of Barry Diller's IAC/InterActiveCorp took a big hit Tuesday after the electronic commerce conglomerate reported results that showed its far-flung operations sputtering on more than one cylinder.
While Wall Street zeroed in on the performance of Diller's online travel web sites, signs of weakness emerged too at HSN, Diller's TV shopping network in St. Petersburg.HSN profits were down in the quarter and the network's sales momentum slipped. Instead of reporting another double-digit sales gain, revenues were up a more modest 4 percent to $546-million. Result were partly dragged down by a 12 percent deline in sales at its overseas networks. The network's operating income declined 3 percent to $33-million.
Diller pooh-poohed the slower sales momentum as an aberration that appears to have ended in July. The network had two $10-million sales days without benefit of airing any big-ticket computers.
"HSN is doing extremely well," he said. He blamed the depressed profits on investments in customer service and the higher costs of getting viewed in more cable homes that will pay off eventually.
Overall, however, IAC fell far short of meeting Diller's optimistic growth goals. The company reported that second-quarter net income dropped 25 percent and lowered its forecasts to the lower end of expectations for the rest of this fiscal year.
IAC said net income for the quarter that ended June 30 was $70-million, or 9 cents a share, down from $93-million, or 16 cents a share. Revenues slipped 2 percent to $1.5-billion. Some of the revenue decline had to do with a change in the way one of Diller's business units accounted for revenues.
IAC's stock has lost $10 a share in value since June 24. The stock closed at $27.03 on Tuesday, down 54 cents. But in after-hours trading on Nasdaq, the stock plummeted $5.06 to $21.97 by 7 p.m. Tuesday.
While some analysts suggest that growth of many Internet businesses appears to have slowed, Diller said the weaker showing had more to do with the overall competitive landscape, not his company's execution.
"There are no real structural issues here," he said. "We have not lost any market share. We will have sustained growth in 2005 that we believe is much greater than this year."
Analysts focused on Diller's big travel Web sites, Expedia, Hotels.com and hotwire.com, which now contribute as much to IAC's revenues - one-third - as HSN. The three sites control about 60 percent of the online domestic hotel business. But Diller' new reliance on travel has exposed his company's business for the first time to the seasonal swings and economic volatility of tourism pricing.
Last year, as the Iraq war began, hotels dumped unsold inventory at deep discounts through Diller's hotel sites. This summer hotel companies got more competitive in posting rates on their own sites. Meanwhile, as room rates and occupancy rates continued to recover this summer, they doled out far fewer deals for sites such as hotwire.com and hotels.com.
"The hotel room supply is still there, but not the deals," he said.
Meanwhile, Diller continued to invest heavily in taking Expedia into the corporate travel business and the Expedia business model into Europe and China. Those investments have yet to pay off.
Other laggards were IAC's online personal ads business, Match.com, which reported flat revenues, and a wider loss at CitySearch, one of Diller's ventures in local online advertising.
Mark Albright can be reached at 727 893-8252 or albright@sptimes.com