Sales of cellphone ringtones from artists such as Outkast and holiday tunes like "Jingle Bells" fueled a strong financial performance by...

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Sales of cellphone ringtones from artists such as Outkast and holiday tunes like “Jingle Bells” fueled a strong financial performance by InfoSpace last year, enabling the company to easily beat Wall Street expectations.

After it released fourth-quarter and full-year financial reports yesterday, the Bellevue company’s stock jumped $6.83 to $44.06 in extended trading.

Strong growth in the nation’s wireless sector buoyed InfoSpace results, as many cellphone subscribers personalize their phones, purchasing ringtones and other content.

“The most critical thing that happened in the last year is that the speculation on what someone might buy on a telephone — and will they actually buy it — all got answered. And, yes, they’ll buy quite a bit,” said Jim Voelker, InfoSpace chairman and chief executive.

In the fourth quarter, InfoSpace posted a profit of $18.9 million, or 58 cents a share, blowing by analyst estimates of 39 cents a share. Sales in the same period totaled $79.7 million, more than double the $39 million in the year-ago period.

For 2004, InfoSpace posted a profit of $82.4 million, or $2.57 a share, on sales of $249.4 million. In 2003, the company recorded a net loss of $6.3 million on nearly half as much revenue.

Contributing to last year’s strong performance were InfoSpace’s mobile division, which provides content and technology assistance to wireless carriers such as T-Mobile, Vodafone and Cingular; and its search and directory division, which includes and

Search and directory revenues in 2004 reached $156.8 million, up 67 percent over the previous year. Increases in the number of searches and price per paid advertising search drove the growth.

During the fourth quarter, the company recorded 205 million searches at an average 19 cents each.

InfoSpace mobile-unit revenue in 2004 totaled $92.5 million, increasing 231 percent over 2003, with content downloads driving the growth.

In 2004, the company settled a number of business acquisitions and divestitures. It bought Switchboard for $109 million in cash, enabling it to double its Yellow Pages business. It also acquired mobile game companies Atlas Mobile, IOMO Limited and Elkware for a combined total of $47 million; and sold its Payment solutions business for $82 million in cash.

InfoSpace settled several lawsuits involving founder and former Chief Executive Naveen Jain, which could include a cash payment of $83 million to the company.

With at least $200.7 million in cash and cash equivalents at the end of the year, the company said it plans to continue to grow through acquisitions.

“We are looking for things on the search side that would add to our ability to gain traffic; and then on mobile side, it could be a skill set, a new means of distribution or content types to leverage the position we are already in and serve the customers better,” Voelker said.

He added that the mobile market is still in its early stages and has lots of growth potential.

Only 30 percent of cellphones are able to download content, and only 10 percent of users actually do.

Peter Spear, an equity analyst at Delafield Hambrecht, said the 2004 performance illustrates InfoSpace is in a position to be a leader in this wireless segment.

“They have such a huge cash position and there’s a lot of small players that will be bought up,” Spear said. “They are doing the right thing to maintain leadership position. … They’ll look for the best assets in the market to acquire them or develop competing technology.”

In 2005, the company expects revenue to be as much as $395 million and for profit to total up to $75 million.

Tricia Duryee: 206-464-3283 or

Figures in parentheses are losses.
Dec. 31 %
4th QTR 2004 2003 CHG
Profit $18,857,000 $9,888,000 90.7
Per share 0.58 0.31 87.1
Sales 79,674,000 39,030,000 104.1
Annual 2004 2003 CHG
Profit $82,401,000 $(6,319,000)
Per share 2.57 (0.20)
Sales 249,354,000 132,230,000 88.6