Since February, LookSmart (NASDAQ:LOOK) has been trading below a buck. Given the company's second-quarter results, don't expect those prices to rise any time soon.

In the second quarter, revenues were $10.2 million, down from $19.1 million in the same period a year ago. The net loss for the second quarter was $5.4 million, which included a $1.9 million non-cash charge for restructuring. The company attributed some part of the revenue loss to dealing with "click fraud" issues in the search business. That's not as bad as it sounds; the company may be doling out money, but it's improving relationships with advertisers in doing so.

Looking at these results, it's hard to believe that LookSmart is in the online search business. Isn't this an industry in hypergrowth? Not for the small fry, it seems -- at least, not this small fry.

LookSmart is an amalgam of various web sites, including Zeal, WiseNut, and FindArticles, along with online services such as NetNanny (which provides parental controls). However, the heart of LookSmart's business is providing online advertising services for smaller businesses.

LookSmart took a hit several years ago when Microsoft (NASDAQ:MSFT), one of its key distribution partners, bolted. The Microsoft deal constituted much of LookSmart's advertising business, and perhaps as much as 80% of LookSmart's revenues. The company has struggled ever since.

LookSmart's CFO has said he will resign by November 1 -- sooner, if the company's search for a replacement bears fruit. He gave no reason, but his departure in the midst of the company's weakness has led the Street to assume the worst. You might do well to think the same.

On the earnings news, LookSmart's stock price plunged 16.9% to $0.59 per share, which gives the company a market cap of roughly $67 million. Compare that to the $61.1 million it has in the bank. Wall Street is essentially valuing LookSmart's underlying business at $6 million or so -- which may not be as irrational as it seems.

Third-quarter guidance predicts $7 million to $8 million in revenues with a net loss of $5.5 million to $6.5 million. LookSmart has consistently lost money since 2003. Given the severity of its losses, it will take time for LookSmart to turn the corner, if at all.

The search-engine market will only get more competitive as Google (NASDAQ:GOOG) and Yahoo! (NASDAQ:YHOO) continue to improve their services. In my opinion, LookSmart would be wise to sell out before things get worse.

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Fool contributor Tom Taulli does not own shares mentioned in this article.