InfoSpace said Monday it is selling Switchboard.com, its online phone-directory service, to Idearc of Dallas for $225 million in cash. The sale, along with...
InfoSpace said Monday it is selling Switchboard.com, its online phone-directory service, to Idearc of Dallas for $225 million in cash.
The sale, along with rumors that more sales could be on the horizon, raises questions about what business the Bellevue company plans to remain in as it restructures.
In an interview, Chairman and Chief Executive Jim Voelker said the Switchboard sale made sense because it will fetch much more than what InfoSpace paid three years ago — about $103 million — for what has been the company’s smallest business.
He said the sale also showed Wall Street that InfoSpace has been undervalued.
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He pointed to the company’s $425 million market capitalization last week, which included $200 million in cash on hand. That leaves its three remaining businesses — mobile, online and directory services — worth $225 million altogether, or what it is getting for Switchboard.com alone.
“The market was way off on this,” Voelker said.
InfoSpace said it expects the sale to close by the end of the year, at which point it would distribute the proceeds to shareholders through a special dividend.
It expects all 47 directory employees to join Idearc.
The announcement sent the company’s stock soaring Monday. It gained $4.13, or 31.2 percent, to close at $17.38.
In addition to the sale, rumors emerged last week that InfoSpace may be selling its mobile business to Motricity, a Durham, N.C., mobile infrastructure company.
The sale of Switchboard.com and the potential sale of its mobile business would leave InfoSpace with only its online-search division, which includes Dogpile, a Web site that aggregates the results of such search engines as Google and Yahoo.
Voelker declined to comment on the rumors, and a Motricity spokesperson did not return phone calls.
Wedbush Morgan Securities analyst Scott Sutherland said a sale to Motricity would make sense.
In a research note Monday, he said Motricity is trying to raise about $175 million potentially to purchase InfoSpace’s mobile unit for the scale it needs to file for an initial public offering.
Sutherland said exiting the mobile and online-directory businesses would allow InfoSpace to focus on online search and receive a better valuation.
“I think the main point, while as a whole their stock hasn’t performed well, they are showing the value of the pieces,” he said.
Sutherland, who has a “buy” rating on the company, adjusted its price target from $19 to $22 a share.
The sale of InfoSpace’s two units could raise the question of whether the strategy is to sell the entire business one piece at a time.
“I think we would say the assets haven’t been valued fairly, but that we like the business we are in,” Voelker said.
“If someone came along and offered to pay a real premium for it, it starts to move you,” he said. “Whether that means buying or selling, we are always in consideration mode.”
Last year, InfoSpace’s 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.
And because of that, investors pressured InfoSpace to put its huge cash balance to work. That prompted a $200 million special dividend.
Tricia Duryee: 206-464-3283 or email@example.com