Doesn't LookSmart (LOOK)

| About: LookSmart Group, (LKST)

Results don't seem to be improving at LookSmart (NASD:LOOK). For the quarter ending March 31, revenue tumbled from $12.0 in Q1 05 to $10.5 million dollars. The company's operating loss was $5 million, slightly above the $4.9 million last year.

The company put on a brave face. It made all its comparisons to the immediately previous quarter instead of going back a year. For example: "Traffic acquisition costs [TAC] were within the Company's guidance range at approximately 59% of total advertising revenue in the first quarter, up from 57% in the fourth quarter of 2005." It's a nice touch, but it does leave something out.

The company's revenue has been shrinking at an alarming rate. In 2003, it was $156.2 million. In 2004, it fell to $77 million and then dropped further to $41.4 million in 2005.

The market's judgment has been appropriately harsh. The stock traded above $20 in mid-2003, and is now at $4.31. The company has cash and cash equivalents of $46 million. LookSmart's market cap is $98 million, so the value attributed to revenue is only about one time the value of the stock less cash on the balance sheet.

LookSmart is relatively small, but it is still too expensive to run. Management is going to have to find a way to shrink operating costs, because revenue growth is not doing the trick and Wall Street has run out of patience.

LOOK 1-yr chart:


Douglas A. McIntyre is the former Editor-in-Chief and Publisher of Financial World Magazine. He is also the former president of Switchboard.com, which was the 10th most visited site in the world at the time, according to MediaMetrix. He has been chief executive of FutureSource LLC and On2 Technologies, Inc. and has served on the boards of TheStreet.com and Edgar Online. He does not own securities in companies he writes about. He can be reached at douglasamcintyre@gmail.com.