from smh:
Looking smart, and now it may be a target as well
By Colin Kruger
July 31 2003
LookSmart shares hit a 12-month high yesterday, fuelled by stronger-than-expected second-quarter results, an earnings upgrade, and speculation that the search engine provider might be an acquisition target.
Its shares gained 3c to close at 31c, after the company reported that revenues increased 83 per cent year-on-year to $US38.4 million ($58 million) for the second-quarter ended June 30, 2003, driven by continuing strong growth from paid search listings. LookSmart reported net income of $US1.2 million, its third consecutive quarter in the black since a maiden profit for the December quarter last year.
Australia's only profitable dot com survivor is still a long way, however, from early 2000 when its shares floated at $3 in February, then skyrocketed to an all-time high of $5.50 in March. At the peak of its popularity one US analyst valued the company at $US8 billion.
For a brief time, LookSmart's Australian founders, Evan Thornley and Tracey Ellery, had a stake worth more than $1 billion, but the share price quickly collapsed when the tech crash hit in April 2000.
Although the company is unlikely to see its high again soon, the success of its paid search listings business means it is also safe from last year's 7c all-time low.
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Chief executive Jason Kellerman said new customers, full inclusion of LookSmart's UK and Japanese business, and Internet traffic growth drove the revenue line "considerably stronger than expected."
The company said revenues could reach $US152 million this year, up to $US2 million more than was previously forecast.
Earnings before interest, tax, depreciation and amortisation (EBITDA), excluding employee share option expenses, is also expected to be $US1 million to $US2 million higher than the earlier $US13 million forecast.
But the new earnings forecast failed to reverse the downgrade which followed LookSmart's first-quarter result in May this year. The company announced that product development and sales expenses would be higher than expected this year and almost halved its EBITDA guidance of $US22 million to $US25 million.
Shares dropped by more than 24 per cent to 20c the day the downgrade was announced.
But most of the stock's recent gains have more to do with Yahoo's $US1.6 billion bid for LookSmart rival Overture this month. Speculation was fuelled that LookSmart might become an acquisition target, with potential acquirers including its largest customer Microsoft. LookSmart would be cheap with a current market value of $104 million.
Mr Kellerman said LookSmart was still in talks with Microsoft about a new sales agreement and neither side would comment until negotiations were completed.
