LookSmart Beats Street, But Lowers 2004 Guidance

Paid search listings provider LookSmart exceeded Wall Street estimates for the fourth quarter, but the struggling company Thursday predicted a net loss for 2004 at the low end of analysts’ expectations.

LookSmart outdid the Wall Street consensus of $40.1 million in revenue and net income of two cents per share for the quarter, pulling in $44.1 million, with net income of one cent per share. However, the company predicted a loss for the year 2004 of $28 million on total sales of between $45 million and $50 million.

The company has been reeling since Microsoft’s MSN opted not to renew its contract with LookSmart in October. Plans for drastic layoffs were announced in December. LookSmart also launched a paid search product to complement its core paid inclusion business in hopes of building more business.

LookSmart’s challenge is to find a way to replace the approximately 70 percent of its income formerly derived from MSN.

“Our priorities are to continue to grow our paid listings, reduce our cost base and implement growth strategies based on profitable segments of the search market,” said Damian Smith, LookSmart’s interim CEO since the January resignation of its former chief executive, Jason Kellerman.

“Over this year LookSmart will introduce a number of new rapidly monetized search products in addition to our core listing business,” said Smith. He did not specify what the new products would be, though he said the company would “draw upon our history of successfully developing early stage search opportunities to deliver innovative solutions within underserved sectors of the market.”

“This is a company in transition,” said Safa Rashtchy, senior analyst with Piper Jaffray. “For a company to go through this kind of change is traumatic. They still have challenging growth ahead of them before they can get to profitability.”