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Friday, January 03, 2003

Don't Let the Door Hit You in Your Giant-Sized, Hyperbolic Ass on the Way Out

Over the holidays, Infospace's board got together for a little ousting party. CEO Naveen Jain, who once told reporters he thought his company would someday be worth a trillion dollars, has been asked to please leave and not come back.

Jain was fond of telling the press that he worked 21-hour days, and he expected the same standard from his employees. Hey, if working at 4 a.m. were the sole determinant of success, Kinko's employees would all be tycoons.

The shame of it is that this didn't happen much sooner. Following the Infospace-Go2Net merger, Jain's desire for control and loyalty was a turnoff to a new and highly accomplished CEO recruit, Arun Sarin, and Go2Net CEO Russell Horowitz. Both left before the confusingly-merged new Infospace even got off the ground. Horowitz would have been a more inspiring and grounded leader - though not for the wireless (Infospace) side, which he didn't particularly understand. But since there was no future for him at the company, it made more sense to take off and take care of his own face-reddening windfall.

If you check out Infospace's current stock price, you'll see that it's around nine bucks. Don't be fooled, though. A 10-for-1 reverse split means that it's actually a sub-$1 stock in the old money.

The merger, it seems, was a failure. It would make more sense for one or the other part of the company to be sold off. As Russ Horowitz often bragged during his tenure, many Go2Net properties such as Authorize.net were cash profitable when they acquired them. The problem with Infospace as a public stock play, and ultimately with the larger merged entity, was and is a large cash reserve that allowed it to delay making hard decisions; to rely on hype rather than the careful balance-sheet scepticism which governed Horowitz's Go2Net.

It would make sense to dump ideas whose time-to-profitabilty is too far out or, as I suggested, sell those parts to a company which has the staying power to see them through. But hindsight is 20-20 and no matter how you slice it, Infospace is now a small company, no matter how well it grows in the near future, and no matter what non-core assets it manages to sell off.

Posted by Andrew Goodman




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