The Company is a developer of tools and technologies that assist consumers with finding content and information on the Internet or mobile phone.
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Infospace is a leading mobile media and technology company providing mobile content as diverse as ringtones, graphics and games along with online search and directory solution. The company currently follows a functional organizational structure, with Mobile phone operators of the U.S forming majority of the company’s clientele whereas the Search and directory service catering to internet users.
Net revenue increased by 12% during the nine-month period ended September 2006 mainly due to a 19% hike in the Mobile content revenue. The hike in Mobile revenue can be attributed to the increasing popularity of the company’s ring tone or true tone service. The operating expense for this particular service is the highest among all services. This along with restructuring expenses led to a 60% increase in overall operating expense.
The company mostly relies on 5 major customers for its revenue, who have been contributing nearly 80% of revenue for the past three years. Mobile content has suffered a major set back with one of these clients backing out. Also the agreements with other clients are up for renewal coming fiscal and there is no guarantee that it will be renewed.
Though the company has initiated restructuring plans, the positive affect of which will mature not before mid-2007. And for first two quarters, the company will have to bear increased operating costs in the form of employee separation costs, loss on contractual agreements and other related expenses.
The market for mobile content and online search is growing rapidly but so is the competition from players like Yahoo and Google preparing to increase their stake. The company is now ill positioned to take advantage of the same, limiting the upside potential of the stock.