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Is the New IAC (IACI) Really an Internet Company?

Aug. 25, 2005 9:15 AM ETIAC Inc. (IAC)1 Comment
David Jackson profile picture
David Jackson

Citigroup Internet analyst Mark Mahaney initiated coverage yesterday on IAC (ticker: IACI, temporarily trading as IACID) with a Hold rating and a $29 price target. (The stock closed last night at $24.35.) One of the topics covered in his initiation of coverage report is the mix of IAC's business, in which he points out that the majority of IAC's revenues come from offline businesses, particularly retailing. Excerpts:


We estimate that Retailing will account for $3.0B in revenue in 2005, 53% of revenue. We also estimate that Retailing will generate $273MM in OIBA (Operating Income Before Amortization), 45% of total OIBA, implying a 9.0% OIBA margin. Although the old IAC’s Internet properties garnered most of the attention, with a particular focus on the online travel business, HSN’s retailing group has always represented a significant portion of the revenues. Post spin, retailing as a percentage of revenues grows considerably larger, especially given the $715MM cash acquisition of Cornerstone, which closed on April 1, 2005. IAC’s Retailing division includes the Home Shopping Network (HSN) and America’s Store TV networks in the US, HSN.com, and several international brands (HSE in Germany and minority interests in Shop Channel in Japan, and TVSN in China) and the recently-acquired Cornerstone Brands portfolio of catalog and online shopping companies (Ballard Designs, Frontgate, Garnet Hill, Improvements, Smith + Noble, The Territory Ahead, and TravelSmith). We estimate that 88% of IAC Retailing’s proforma revenue (adjusted for the inclusion of Cornerstone) in the June quarter came from domestic sales. Cornerstone revenues are all domestic.

HSN is the number two player in the U.S. TV-shopping market behind QVC and reached approximately 78% of all US homes with a television set by the end of 2004. (Including non-overlapping households from America’s Store, IAC’s TV shopping networks covered 84% of all households with

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David Jackson profile picture
I'm the founder and CEO of Seeking Alpha. Before Seeking Alpha, I worked as a technology research analyst for Morgan Stanley in New York. After I left, I wrote The ETF Investing Guide (which you can find by clicking on "Author's Picks" below), and some articles about individual stocks, and then started inviting other people to contribute to the website. Seeking Alpha is now the dominant crowdsourced platform for discussion of stocks and investing, and the only place with coverage of many mid and small cap stocks. I have a B.A from Oxford University and an MSc from The London School of Economics, and am married with five children.

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