Losses in its mobile content business spur major changes.
Mobile content and online directory provider InfoSpace is restructuring its mobile media business, including 250 layoffs.
Beginning this week and continuing into next year, the company plans to eliminate 250 positions, mainly in its mobile content business. The company announced last month that Cingular, its largest ringtone distributor, would begin to enter licensing agreements directly with record labels instead of using InfoSpace as a middleman.
Ringtone sales make up the bulk of Infospace's mobile revenue, which itself comprises half the company's overall revenue. During the first half of 2006, InfoSpace generated $89.6 million in mobile revenue, of which ringtones from record labels made up $55 million. InfoSpace's total revenue for the same period was $186.1 million.
The remaining portions of InfoSpace's business are mobile infrastructure and Web search, including pay-per-call ads from Jambo.
This quarter, InfoSpace expects to incur $6.5 million for severance costs, and between $6 million and $7 million in costs related to closing its Hamburg, Germany-based office and other facility-related charges, and to terminating certain agreements. It will add another $2 million in similar costs next quarter, along with as yet undetermined costs for "goodwill" and other intangible assets.
"These decisions, while difficult, are critical to the long-term success of InfoSpace," Jim Voelker, chairman and CEO of InfoSpace, said in a statement. "Despite the setback in our mobile media business, our online and mobile infrastructure businesses generate solid cash flow. In addition, we have a strong balance sheet with over $400 million in cash."
As part of the restructuring, InfoSpace's chief administrative officer, Ed Belsheim, will leave the company on January 1, and has resigned from the board, effective immediately. Belsheim has been at InfoSpace for six years.
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