As the dark clouds of an uncertain market crouches, Infospace is seeking to renew itself with the old guard.
The company, which provides services for wireless devices, merchants and Web sites, lost three key members of its management staff, triggering stock-market slides, downgrades and a surge of pessimism among analysts.
Arun Sarin, Infospace’s chief executive officer, stepped down from that position. He has been replaced by company founder Naveen Jain, who occupied the seat before Sarin was appointed CEO nine months ago.
Sarin said he stepped down to be closer to his family in the Bay Area, which is quite a distance to the Seattle area, where the company is located. He will serve in a less visible capacity on the company’s board of directors as vice chairman.
The other defections are Chief Operating Officer Russell Horowitz, former chairman of Go2Net-which Infospace acquired last year-and Chief Financial Officer Rand Rosenberg. Horowitz also steps out of the main stage to become an executive consultant, while Rosenberg will disengage from the company entirely.
Many analysts and industry watchers think Sarin’s action will inflict deep gashes on the company as the former CEO drew tremendous goodwill, mind share and stock-market strides for Infospace because of his deep contacts in the wireless world.
In his unobtrusive position as a vice chairman, he has confirmed fears that he will not be able to muscle in as much clout as he commanded in the past nine months.
The effect was quick on the company’s stock position as it plummeted giddily, reinforcing investor doubt about a company that had had brilliant life since it was born in 1998. The stock was trading at RCR press time at under $7. At one point, the stock traded at $138.
Analysts think the resignations were due to internal pressures, as they point to management conflicts as well as market defects.
Barney Dewey, an analyst with Andrew Seybold’s Group, said Infospace’s implementation of WAP has not caught on in the United States because a good portion of Infospace’s business is based on wireless activities like m-commerce and promotions platforms, which are still stumbling in the market, unlike in Europe or Japan.
“Not many people are using the Web browsers or handsets,” he said.
Analysts also chalk it up to conflicts between management and the board of directors.
“It is mostly a political issue,” said Dewey, explaining that such a situation usually occurs when management is at odds with the board on an issue or string of issues, or when the management does not meet a commitment made to the board.
Both Jain and Sarin have maintained a public civility, with Jain saying he loved Sarin to death and would appreciate his contributions.
Jain, who deployed his high-arc skills to garner investor confidence, says that very little has changed and that he hopes to revive the company.
With dropping stocks and downgrades, there is a lot of work on hand.
Merrill Lynch downgraded it from accumulate/buy to neutral/accumulate; Dain Rauscher from strong buy to neutral; Pacific Crest from strong buy to buy; W.R. Hambrecht from buy to neutral; and USB Piper from buy to neutral.
Infospace will announce its fourth-quarter earnings Jan. 29 and is expected to meet estimates of a profit of a penny a share on sales of $65.75 million.
