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Shares of Local.com (NASDAQ:LOCM) got a boost on Thursday. Shares rallied 25% in the pre-market after announcing a new deal with Bing, the search engine from Microsoft (NASDAQ:MSFT). Despite the hype, shares of the localized search engine company closed up only 19% and still remain below the $2 mark. Here's why you should consider buying shares of Local.com now.

The partnership with Microsoft connects Local.com to millions of customers searching for products and services through Bing. Microsoft's search engine has seen growth recently against larger rival Google (NASDAQ:GOOG). In July, Bing had a 17.9% market share of searches in the United States. This number is up 2% from the previous year. Bing has seen growth through growing demand for Windows 8 products and being the search of choice for Apple's (NASDAQ:AAPL) Siri voice search technology. Google and Yahoo (NASDAQ:YHOO) had market shares of 67% and 11.3%, respectively for the month of July.

Local.com will provide location-based local product search results for web searches through Bing. Local.com's new deal will also integrate search results using the company's Krillion platform. Krillion offers unique searching, connecting customers and retailers with actual products in stock, using patented technology. Local.com paid $3.5 million to acquire Krillion back in 2011.

According to Searchenginejournal.com, the following retailers participate in Krillion technology:

· Best Buy (NYSE:BBY), Costco (NASDAQ:COST), Express (NYSE:EXPR), Fry's, Home Depot (NYSE:HD), K-Mart (NASDAQ:SHLD), Lowe's (NYSE:LOW), Nordstrom (NYSE:JWN), Orchard Supply (OTCPK:OSHWQ), Office Depot (OD), Radio Shack (NYSE:RSH), Rite Aid (NYSE:RAD), Sears (SHLD), Staples (NASDAQ:SPLS), Target (NYSE:TGT), True Value, Wal-Mart (NYSE:WMT).

In the press release linked above, Local.com chief executive officer Heath Clarke had this to say about the deal:

"We're pleased to be partnering with Bing to provide relevant local product shopping information to millions of customers. Our dynamic local product data enhances the online shopping experience for consumers by providing them with valuable information about which retailers carry the products they are looking for."

For Local.com investors, this new partnership could mean a return to profitability sooner than expected. In fiscal 2013, analysts on Yahoo Finance project the company to post a loss of $0.35 per share. Revenue is expected to drop 2.0% to $95.8 million. Fiscal 2014 has no earnings per share estimates, but does provide a prediction of 10% revenue growth to $105.4 million.

In the most recently reported second quarter, Local.com saw network revenue grow 40% from the first quarter. Owned & operated revenue fell from the previous quarter and was down almost 100% from the previous year. The addition of the Microsoft deal and improving search advertising rates for the second half of the year should keep up the quarter to quarter increases. The company also raised its full year revenue target to a range of $95 to $97 million. Here is a look at revenue by segment:

Q2 '13

Q1 '13

Q2 '12

Owned & Operated

$10.9 mil

$13.0 mil

$20.5 mil

Network

$11.6 mil

$8.3 mil

$4.1 mil

Business Solutions

$0.1 mil

$0.2 mil

$2.1 mil

Total

$22.7 mil

$21.5 mil

$26.7 mil

It's also worth noting that Local.com sold its Spreebird business. The discount Groupon-style website has been a declining business from Local.com and not part of its growth strategy. The business, which was sold in July, has been losing money for the company and hurting earnings per share. The company estimates the departure will save earnings and cash flow by $600,000 annually.

Over the last 52 weeks, shares of Local.com have struggled. After hitting a yearly high of $3.00 back in November, shares have fallen over 50%. In 2013, shares are down only 5% and could turn positive as investors and analysts digest the new deal from Microsoft.

Back in 2012, I named Local.com as one of my top ten stock picks for the year. I gave three key reasons: Local.com competes in high growth areas, has an extensive website portfolio, and is a buyout target. All three of those key points remain true today and are reasons to go long this small cap stock. Local.com has extensive partnerships with websites, newspapers, and the Yellow Pages to bring local search results to customers online. The website operator is paid to offer its search results and has a strong customer base that will continue to provide a steady revenue stream. Investors should watch and consider buying this stock that seems ready to take off at under $2 a share.

Source: Local.com Shares On Sale With New Microsoft Partnership