A federal court ruled in favor of an InfoSpace (NASDAQ:INSP) shareholder yesterday to the tune of $247 million. In a curious turn, the suit is not against InfoSpace, but for it. If the award is upheld, the company could collect about $8 a share. That would leave the stock at yesterday's $16.07 selling for about a $1.70 less than total cash.

The plaintiff alleges that InfoSpace co-founders Naveen and Anu Jain wrongly traded in the company's stock to the detriment of shareholders. The specific misdeed was violating Section 16(b) of the Securities Exchange Act of 1934's prohibition against short-swing trading by company insiders.

The judge issued a summary judgment, which says that based on paper filings there is no dispute as to the facts. That means there was no trial and presentation of evidence before a judge or jury, so investors shouldn't count on the cash just yet. The Jains dispute the decision aggressively in a press release and will certainly appeal.

Then and now
But the potential $247 million is not what's interesting about InfoSpace. The Jains are old news -- along with the days of InfoSpace as bull market high flyer. With rare corporate bluntness, InfoSpace "terminated" CEO and chairman Naveen Jain in Dec. 2002 and replaced him with a recently elected board member, Jim Voelker, previously of Nextlink Communications and U.S. Signal. Voelker has brought in new top management, started selling non-core businesses, and cut expenses. Investors today sniff a turnaround, and the stock is up sharply since last fall's reverse split.

After reviewing recent financials and company conference calls (thanks to www.StreetEvents.com), I see that now InfoSpace looks smart with two quarters of free cash flow and six of sequential rising revenues. While the wireless business that originally attracted many investors has stagnated and declined to 18% of revenues, the two other business segments -- Search & Directory (including the company's Dogpile search engine) and Payment Solutions -- grew 32% and 28% year over year, respectively in Q2 to make up 56% and 17% of total revenues. (The remaining sales stem from non-core services.)

As of June 30, the company perched safely atop $301 million or about $9.70 a basic share in cash. The stash stands to gain not only from any increase in interest rates, but more importantly from continuing the free cash flow streak.

That may not be a sure thing in the short term, however, as the company says its six quarters of sequential revenue growth will come to an end in Q3 and decline from $38.3 million to $32-$34 million, flat or slightly down from last year's $33.6 million. And the company faces intense competition in the Search & Directory business from Yahoo! (NASDAQ:YHOO), Google, Ask Jeeves (NASDAQ:ASKJ), and potentially Microsoft (NASDAQ:MSFT), among others.

My short take? For aggressive investors willing to risk a turnaround, InfoSpace might satisfy their checklist. The new, experienced management appears focused on growing core businesses and slashing expenses, while the cash offers downside protection. That's the real investment thesis here -- not whether or when the Jains pay up.

Tom Jacobs will be guest analyst in the October issue of Tom Gardner's Hidden Gems . And all this month, he'll be celebrating The Motley Fool's 10th anniversary with 10 Ways to Make More Money Now!