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IAC/INTERACTIVECORP Reports Operating Results (10-Q)

July 29, 2010 | About:

10qk

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IAC/INTERACTIVECORP (IACI) filed Quarterly Report for the period ended 2010-06-30.

Iac/interactivecorp has a market cap of $2.89 billion; its shares were traded at around $24.78 with a P/E ratio of 275.4 and P/S ratio of 2.1. IACI is in the portfolios of Chase Coleman of TIGER GLOBAL MANAGEMENT LLC, Jim Simons of Renaissance Technologies LLC, Bill Gates of Bill & Melinda Gates Foundation Trust, Bruce Kovner of Caxton Associates, George Soros of Soros Fund Management LLC, Steven Cohen of SAC Capital Advisors.

Highlight of Business Operations:

A significant component of the Company's revenue is attributable to a paid listing supply agreement with Google Inc. ("Google"), which expires on December 31, 2012. For the three months ended June 30, 2010 and 2009, revenue earned from Google was $174.1 million and $136.1 million, respectively. The majority of this revenue is earned by the businesses comprising the Search segment.

For the six months ended June 30, 2010 and 2009, revenue earned from Google was $345.7 million and $265.4 million, respectively.

Cost of revenue in 2010 increased $37.6 million from 2009 primarily due to increases of $28.3 million from Search and $5.6 million from Media & Other. The increase in cost of revenue from Search was primarily due to an increase of $24.9 million in traffic acquisition costs related to an increase in revenue. As a percentage of revenue, traffic acquisition costs increased over the prior year period due to an increase in the proportion of revenue from distributed toolbars and similar arrangements with third parties who direct traffic to our websites, as well as a shift in partner mix to partners carrying higher traffic acquisition costs. Cost of revenue from Media & Other increased primarily due to Notional, which was not in the prior year period.

Cost of revenue in 2010 increased $60.8 million from 2009 primarily due to increases of $53.6 million from Search and $6.3 million from Media & Other. The increases in cost of revenue from both Search and Media & Other are due primarily to the factors described above in the three month discussion.

Selling and marketing expense in 2010 increased $1.1 million from 2009 primarily due to increases of $6.1 million from ServiceMagic, $3.0 million from Media & Other and $2.6 million from Match, partially offset by a decrease of $10.9 million from Search. The increase in selling and marketing expense from ServiceMagic is due to an increase of $3.5 million in online and offline marketing and an increase in compensation and other employee-related costs, due in part, to the continued expansion of its sales force. Selling and marketing expense from Media & Other increased primarily due to an increase of $1.9 million in online marketing at Pronto. The increase in selling and marketing expense from Match is due to an increase of $2.2 million in advertising and promotional expenditures primarily associated with its recent acquisitions, partially offset by the sale of Match Europe. The decrease in selling and marketing expense from Search is primarily due to lower advertising and promotional expenditures of $6.6 million, as the prior year period included expenditures associated with the NASCAR partnership and an ad campaign to rebrand the UK.Ask.com website. Also contributing to the decrease in selling and marketing expense from Search is a decrease in compensation and other-employee related costs at CityGrid Media (formerly Citysearch), due in part, to a decrease in average headcount.

General and administrative expense in 2010 increased $8.4 million from 2009 primarily due to increases of $5.1 million from corporate and $2.9 million from Media & Other. The increase from corporate is due to an increase of $6.3 million in non-cash compensation expense related to equity grants issued subsequent to the second quarter of 2009 and the favorable impact of forfeited awards in the prior year, partially offset by lower salary expense and professional fees. General and administrative expense from Media & Other increased primarily due to Electus, which was not in the prior year period, and increased operating expenses associated with Vimeo.

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