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Media - Monday, July 16, 2007

$100M Buys Dictionary.com Parent Lexico

Answers.com (NASDAQ: ANSW) has bought Dictionary.com Parent Lexico for $100M. We expect this news might surprise people but we think its a smart buy for Answers.com and would be shocked if there was not a fair amount of bidding here. Domains like dictionary.com are worth a lot parked but Lexico has done a lot to bring in organic traffic and secure loyalty. Lexico also owns and operates Thesaurus.com and Reference.com.

That said, Lexico won a handsome multiple as it's revenues were only $7M in 2006 with net income of $2.8M. The network drew 11.5M uniques.

Answers.com gives a convincing report on synergies between the two companies. It better. Answers also issued a poor quarterly forecast. It said revenue in the June quarter will be $2.75M to $2.8M, rather than the original guidance of $2.8M to $3.2M. The company blamed “more pronounced seasonality in traffic in 2007 that what was experienced in 2006, along with a continued slower than anticipated ramp of its direct ad sales effort.”

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