LookSmart told investors last week that the end of its paid inclusion deal with Microsoft on Jan. 15 would severely hamper its business in 2004, with losses of up to $30 million.
The guidance cast a pall over an otherwise upbeat earnings report. In the final quarter with Microsoft's MSN as a distribution partner, which accounted for two-thirds of its sales, the San Francisco paid inclusion provider returned $1.6 million of net income on $44 million in sales. In the first quarter, LookSmart expects a steep decline, with losses of $13 million on $17 million in revenue.
LookSmart said it had $70 million in cash at the end of the year and should end the first quarter with $60 million.
New interim CEO Damian Smith said the company would make up for the loss of MSN by developing its new business lines, including a paid search business begun last October, and instituting more cost cuts. Smith said the company learned from Microsoft's jilting, vowing to pursue a more diverse customer base. “We are no longer actively seeking paid inclusion deals with large distribution partners,” he said.
