Why Interactive Should Split Up

Mar.31.08 | About: IAC/InterActiveCorp (IAC)

In all likelihood, at some point this year, Interactive Corp. (IACI) will be trading as five separate companies, as Barry Diller prevailed over his benefactor (I wanted to say sugar daddy, but I think that's a bit too coarse, and may not be totally accurate) John Malone in Delaware court. I actually read through the judge's decision believe it or not.

It's probably a good thing for IACI to split up. I love the words of a Stifel Nicolaus analyst who described the company as a "decade-long project in poor capital allocation."

The company, particularly the interactive part, has always reminded me of the food court at the mall. At many malls, the food court doesn't have any restaurants that you've ever heard of... instead it's a bunch of fast-food joints with derivative names and logos, redolent of something vaguely familiar. The burger joint is called Burger Duke. The Chinese place is some pun using the word wok. The chicken place is some non-sequitor like Rotisserie's Best. The other thing about those places: they're not that good.

And unfortunately, you can't just snap up a bunch of food court joints and get yourself a Panera Bread (NASDAQ:PNRA) (or whatever the hot growth retailer/restaurant is these days).