Diller eyes deal making with possible sale

NEW YORK (Reuters) - Barry Diller may be about to hang a ‘for sale’ on, saying on Tuesday that his search advertising business could be open to a takeover given the competition it faces from Google Inc and Yahoo Inc.

Diller, known for his dealmaking in the media business, made the comments in a conference call to discuss quarterly earnings at IAC/InterActiveCorp IACI.O, which owns, dating site, and CitySearch.

“We’ve been asked a lot whether we’re open to consolidating transactions in the area of search. The answer is yes,” Diller said. “And, it is unlikely that we would be the consolidator.”

While Diller cautioned “you cannot really make any absolutes” about deals, he acknowledged that faced a challenging environment in a search business. is a distant fourth behind Google GOOG.O, Yahoo YHOO.O, and Microsoft MSFT.O in Web search, holding just 4 percent of the market, according to comScore. Most of its revenue is generated through an advertising relationship with Google.

Diller has been disappointed that Ask has been unable to grow its market share since it was bought in 2005, according to a person familiar with the company’s strategy.

For the third quarter, revenue at its IAC’s media and advertising business, which is dominated by its business, declined 11 percent.

Overall, parent company IAC also reported lower revenue, down 9 percent from a year ago, but sales and profit were nonetheless stronger than forecast, sending its shares up 1 percent in mid-day trade. Shares initially jumped 5 percent.

Credit Suisse analyst John Blackledge said in a note that IAC’s operating profits were “well ahead of our expectations.”

IAC’s quarter was boosted by the sale of shares in OpenTable Inc and the sale of its Match Europe unit, which helped lift earnings to $21.7 million, or 16 cents a share. Analysts had expected profit of 13 cents a share, according to Thomson Reuters I/B/E/S.

It posted a loss of $14.8 million, or 11 cents a share, a year earlier.

Investors have pressed the company, which has around $1.8 billion in cash on its balance sheet, to return the cash to shareholders either by a stepped up share buyback or a dividend payout.

IAC, which has authorization to buy back 21 million shares, repurchased 5.6 million shares during the quarter.

Conversations with Liberty Media LINTA.O, which has more than 16 percent of the outstanding shares of IAC, about buying out its stake kept the company from buying back even more stock on the open market. Those talks have been terminated.

“It sounds like they were working on something with Liberty that would have taken a lot of their existing share repurchase authorization that fell through,” said Credit Suisse’s Blackledge. “Or we probably would have seen a bigger share buyback number.”

Liberty Media Chairman John Malone was a major shareholder of IAC and has been selling down its ordinary IAC shares on the open market since last December.

Malone and Diller fell out in a dispute over control of IAC which ended up in a 2008 court case that Diller won.

Liberty retains a 62 percent control through a class of super-voting shares but Diller runs IAC through a long-standing proxy agreement that gives him the sole right to vote those shares.

IAC shares were flat at $19.35 in early afternoon trade on the Nasdaq.

Reporting by Yinka Adegoke; Editing by Paul Thomasch, Derek Caney, Dave Zimmerman, Leslie Gevirtz