August 6, 2014 / 11:50 AM / 3 years ago

Israel's Perion lowers 2014 outlook, looks to shift to mobile

* Q2 net income $27.4 million vs $17.6 million

* Firm moves focus away from desktops and search

By Ari Rabinovitch

JERUSALEM, Aug 6 (Reuters) - Israel-based Perion Network posted on Wednesday higher quarterly earnings, but lowered its 2014 outlook after Google dented revenue prospects by unexpectedly altering its browser policy.

Perion, whose technology helps developers distribute apps and make money off them through advertising, is also shifting focus away from desktop computers and search functions to the mobile and video sectors, company chief executive Josef Mandelbaum told Reuters.

“We’re lowering the outlook mainly because of the change in (Google browser) Chrome. We’re not going to spend as aggressively because we would be losing money, and we are preserving the profitability of the business,” Mandelbaum said.

Last month Google made a simple yet significant switch, adding extra steps for users to take in order to accept internet add-ons, when previously, agreeing was the default setting, he said.

This will likely cut into revenue, Mandelbaum said, because users are less likely to take the time to agree to a new add-on - a process that generates income for Perion.

Perion and its competitors, which include IAC/InterActiveCorp and Blucora Inc, had not expected the change, he said.

“If past history is an indicator, it will require two to three quarters of adjusting,” he said.

Perion shares in Tel Aviv were down 1.53 percent to 27.10 shekels in afternoon trading.

OUTLOOK SLIPS

Perion is also looking to lift its activities in the mobile sector. In June it agreed to buy Grow Mobile Inc of San Francisco for up to $42 million in cash and equity to expand its offering for mobile application advertising.

“We are actively looking at further acquisitions ... and there are things in the pipeline,” Mandelbaum said.

Second-quarter revenue jumped to $111 million from $81.7 million a year earlier while net income rose to $27.4 million from $17.6 million.

For 2014, Perion trimmed its revenue outlook to $380-$400 million from a previous range of $460-$470 million.

The forecast for earnings before interest, taxes, depreciation and amortization (EBITDA) was cut to $110-$120 million from $125-$130 million and its estimate for net income fell to $80-$90 million from $103-$108 million.

Perion announced last week it had extended by three years its partnership with Microsoft search engine Bing, which in the past has brought hundreds of millions of dollars in revenue, Mandelbaum said.

He added that the new deal should be similar in size.

Perion is also known for its consumer apps IncrediMail and Smilebox. (Editing by Steven Scheer and Crispian Balmer)

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