IAC: If at first you don't succeed, spin off the weak stuff

Wanted: Shareholders for four of Barry Diller's castoffs. Requirements: A high tolerance for pain and an affinity for businesses--a struggling TV-based retailer, an online mortgage referral business, an under siege ticket vendor and a company the hawks condos and vacations--that require a long-term view.

IAC delivered a strong message on Monday: Internet conglomerates don't work. It also holds some clunkers that it hopes to spin off in the name of shareholder value. Shareholders must be so proud today. By owning IAC, run by mogul Barry Diller, they get the equivalent of Wall Street spam. Since they own IAC they'll wind up with a portfolio littered with HSN, Ticketmaster, Interval International and LendingTree.

Good luck with that fearsome foursome. Maybe one of those you'd actually buy on the open market. At least LendingTree will be a good short--mortgages and financial services spells OUCH.

Here's IAC's big plan to break up into five publicly trade companies:

IAC will include a bunch of businesses including Ask.com, Bloglines, CitySearch, CursorMania, IAC Advertising Solutions, Match.com, CollegeHumor and other investments. Everything else that could bring IAC down is being spun off.

The breakdown from the statement:

• IAC properties include: Ask.com, Bloglines, Citysearch, CursorMania, IAC Advertising Solutions, Evite, Excite, InsiderPages, iWon, My Fun Cards, My Way, Popular Screensavers, Smiley Central, Webfetti and Zwinky. Match.com, ServiceMagic, Shoebuy.com, Entertainment Publications and ReserveAmerica. And Black Web Enterprises, BustedTees, CollegeHumor, GarageGames, Gifts.com, Green.com, InstantAction, Primal Ventures, Pronto, Very Short List, Vimeo and 23/6. IAC is also keeping investments in Active.com, Brightcove, FiLife, Medem, MerchantCircle, OpenTable, Points.com and SHOP Channel.
• HSN will include IAC's retailing businesses such as HSN TV, HSN.com and a bunch of catalogs including Ballard Designs and Garnet Hill.
• Ticketmaster, which includes the various ticket URLs owned by the unit.
• Interval International, which includes CondoDirect, Resort Quest Hawaii and VacationSource.com.
• And Lending Tree, which includes RealEstate.com and Home Loan Center.

Diller said the spinoffs allow IAC to explain its business in one sentence. "We've been a complex enterprise almost from the very beginning 12 years ago, with hundreds of transactions over those years. And while we've created a lot of value, I've always believed our complexity and many mouthfuls of sentences to explain who we are and what our strategy is have hampered clarity and understanding with all our constituencies, particularly investors," said Diller.

Describing IAC is still a mouthful, but it is simpler than it was a day ago. IAC also outlined a bit of the prospects facing its spin offs. Here's IAC's take and my view:

Ticketmaster: IAC says the company is entering the "most dynamic era in its history" and having its own stock will help shape the live entertainment industry. My take: This sounds like "we're going to copy Live Nation."

LendingTree: IAC says it is under pressure and is a valuable asset. My take: Look out below. IAC need this asset off its balance sheet since a mortgage/housing turnaround will take years.

Interval: IAC says it will be a "great stand-alone company." My take: I doubt it but it won't be the train wreck that LendingTree will be.

HSN: IAC says it will have a solid business as a pure play retailer. My take: It's possible HSN would be acquired at some point. Or it could become a consolidator if its currency holds up. The jury on HSN--as well as the newfangled IAC--is out.

Update:  Diller said on the company's conference call that IAC is going with Google for its sponsored listings. The deal is valued at about $3.5 billion, said Diller.