Will Splitting Up Solve IAC's Problems?

Like most overly diversified media conglomerates, Barry Diller's IAC (Nasdaq: IACI  ) will rarely fire on all cylinders. This morning's quarterly report bears that out, with weakness at the company's catalogs and LendingTree businesses offsetting gains elsewhere. But IAC's upcoming split could help turbo-charge those results in future quarters.

Fourth-quarter profits before an intangible asset impairment charge fell by 29%, to $0.46 a share. Revenue inched 8% higher, to nearly $1.9 billion. (Catch up on IAC's third-quarter earnings.)

With Diller's plan to split IAC's empire into five pieces still intact, the company is breaking down its performance into what the five businesses would look like on their own:

Rev. Growth
Q4 2007

Pre-Amortization
Operating Profit Growth

New IAC

21%

(19%)

HSN

3%

(7%)

Ticketmaster

27%

8%

LendingTree

(55%)

NM

Interval

35%

12%

Don't get disenchanted over the operating-profit slips. New IAC's operating slide is partly because of spinoff-related corporate overhead costs that get lumped into the category. The dip at HSN is mostly the result of a slowdown with its catalog business, since the Home Shopping Network itself is doing just fine.

Fools also shouldn't get too excited about the healthy top-line gains at every division but LendingTree. Interval's revenue would have grown by just 9% during the period, if not for its acquisition of ResortQuest Hawaii.

Judging by the report, the varied results within IAC's different segments should make its divided-up parts far livelier than its current whole. Despite IAC's recent boardroom drama with Liberty Media (Nasdaq: LCAPA  ) , splitting up the company to maximize the value of its individual properties makes too much sense to ignore.

"New" IAC will be nimble, with fast-growing content magnets like Match.com, Citysearch, and the Ask.com search engine. Think Yahoo! (Nasdaq: YHOO  ) in running shoes. Meanwhile, Ticketmaster is in a sweet spot, with ticket sales soaring at higher price points. The music labels may be tanking, but companies like Ticketmaster and Live Nation (NYSE: LYV  ) are raking in the cash from headliner tours. LendingTree is up for stump removal, although lower interest rates may get the company back into a refinancing groove to offset the latest mortgage declines. And Interval is moving along nicely; it may make a great acquisition for travel portals like Expedia (Nasdaq: EXPE  ) or Orbitz Worldwide (NYSE: OWW  ) .

That leaves HSN, which could be the Scooby snack that appeases Liberty Media in a deal to relinquish Liberty's controlling stake in IAC.

IAC is a new-media company with old baggage -- and those bags need to be shipped off to five different destinations. Let's hope that none of those parcels get delayed.

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