InPhonic in freefall, considers sale

Online wireless retailer InPhonic Inc. said that its third-quarter results will fall significantly below previous guidance, an announcement that coincides with the company’s plans to consider business options including a possible sale.
The company said it chose Lazard Middle Market to help it conduct a review of financing and strategic alternatives that “could include a re-financing of existing credit arrangements, merger, sale, strategic alliance or other transaction.”
InPhonic did not provide any details for a revised outlook on its financial condition, but CFO Ken Schwartz said that third quarter results “did not meet our expectations” and that 2007 has been a “turbulent year” for the company. InPhonic lost $40.6 million from continuing operations in the second quarter, an increase from the $9.4 million loss the company posted in the second quarter of 2006. The company’s second-quarter revenues were down year-over-year as well, from $92.1 million to $79.4 million.
“We have taken significant cost-cutting steps and are working with Lazard to address our financing requirements,” Schwartz said. “The company requires funding to continue operations, fund our losses incurred to date and address our financing requirements. . We believe the critical changes that we have already begun to implement are necessary for our ongoing business and to achieve profitable operations, but we cannot provide any assurance that we will receive the funding required in the near term to continue these changes for the business.”
The company said it terminated a proposed partnership with distribution company Brightstar Corp., in which Brightstar would acquire InPhonic’s distribution, inventory and fulfillment operations and become the company’s exclusive provider of hardware, direct-to-consumer distribution and other services. A definitive agreement between the two companies had been expected by Sept. 30, and Brightstar had invested $5 million in InPhonic as a sign of its commitment.
InPhonic also has had several recent changes in senior management: Schwartz was named CFO in July, and the company’s new CEO, Andy Zeinfeld, took over last week. The company eliminated its COO position “as part of a more streamlined operating structure.”