Bullish on InfoSpace

I’ve heard it occasionally said about InfoSpace, which owns metasearch engine Dogpile, "what do they want to be when they grow up?" In other words, what’s their business model?

Here’s a very bullish piece, originally published in The Motley Fool, that argues the model is healthy and InfoSpace is undervalued by the market:

Last night, InfoSpace closed out 2005 in fine fashion. Earnings before one-time favorable charges rose from $1.40 to $1.60 per share, while revenues came in 36% higher to hit $340 million.

Even after buying back $70 million worth of its stock, the company’s cash balance remains strong, clocking in at $11.16 a share. Back that out to arrive at an enterprise value of less than $450 million. A leading and consistently profitable technology company at just 2.2 times 2005 sales? Let’s put this into perspective. Last month, Motley Fool Stock Advisor pick Electronic Arts (Nasdaq: ERTS – News) agreed to buy online gaming upstart Jamdat Mobile (Nasdaq: JMDT – News) at more than 10 times trailing revenue.

Adding a little more color to that particular acquisition, EA’s buyout price of $680 million would be more than enough to swallow InfoSpace whole, yet InfoSpace’s mobile revenues are nearly twice Jamdat’s.

While InfoSpace owns a very small share of the consumer search market, it has considerable mobile assets that are not as visible to consumers (or many in the industry for that matter). Separately, today, the company announced a multiyear renewal of its relationship with Yahoo! (search results and text advertising).

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