IAC's Big Question: What to Do with Ask.com

| About: IAC/InterActiveCorp (IAC)

Look for IAC/InterActiveCorp (NASDAQ:IACI) to unload its Ask.com search engine rather than confront what even chairman and CEO Barry Diller admitted Tuesday was a "speculative" future.

While a sale wouldn't deliver anything near the $1.85 billion that IAC paid to buy Ask.com predecessor Ask Jeeves five years ago, its fourth-ranking 3.9% share of the market has no doubt stirred up interest from search's top three.

Second-placed Yahoo Inc. (NASDAQ:YHOO) and third-placed Microsoft Corp. (NASDAQ:MSFT), which agreed in July to partner in search while maintaining respective entries Yahoo.com and Bing.com as separate brands, would have the most to win from an Ask.com acquisition. But don't be surprised if Google Inc. (NASDAQ:GOOG) produced a pre-emptive bid to protect its dominant 64.6% share, as measured by comScore Inc. (NASDAQ:SCOR) for September.

"We've been asked a lot whether we're open to consolidating transactions in the area of search," Diller said during an earnings call Tuesday. "The answer is yes, and it's unlikely we'd be the consolidators."

Any such sale would reinforce the notion penned a quarter ago by Bernstein Research analyst Jeffrey Lindsay that IAC is "a large pile of cash with some average to underperforming businesses attached." The analyst went on to liken Diller's collection of Internet assets to "a private equity fund with approximately 17% of the assets under its control invested."

IAC continues to sit on $1.8 billion of cash. But the cash pile would have been much smaller, presumably, had the company succeeded in its stock repurchase negotiations last quarter with John Malone's Liberty Media Corp.

Liberty still owns 14% of IAC despite massive and successive dumpings of the stock on the open market. Its most recent sale was noted in a regulatory filing Monday that recorded another disposition of nearly 250,000 IAC shares by Liberty. The filing also indicated IAC's longtime shareholder, which for years had a voting majority, still had 18.4 million IAC shares in its portfolio.

The stock sales started after Liberty lost a case in Delaware Chancery Court in 2008 to maintain a blanket voting majority after IAC splintered itself into five separate companies. For all the hard feelings, however, Diller assured listeners Tuesday that the failure to come to buyback terms with Malone's company wasn't personal but due to "technical reasons." -

Richard Morgan