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September 20, 2006 at 1:28 PM

InfoSpace loses major carrier business

InfoSpace gathered hundreds of its Bellevue employees at Meydenbauer Center at 2 p.m. today as the company released news that one of its wireless-carrier customers no longer needs its services.

The dissolution of the customer relationship will negatively affect the company’s mobile revenues, which totaled almost $90 million in the first six months of this year, the company said in a release.

InfoSpace helps carriers sell ringtones and other content to wireless customers by developing relationships with record labels and other companies.

In the release, issued after the stock market closed, the company said one of its customers, which it did not identify, plans to develop direct licensing relationships with the major record labels starting in early 2007.

Because of this, the company said it plans to rationalize its costs to align them with future revenues. Specific plans will be announced within 30 days.

“While we are disappointed in this decision and we will realign costs to reflect the revenue reduction, we maintain a strong presence in mobile infrastructure and search services,” said CEO Jim Voelker.

For the past couple of months, Wall Street analysts criticized InfoSpace’s business model because they said carriers could work directly with music labels and studios to cut out InfoSpace, which acts as a middleman.

Besides InfoSpace’s mobile division, it also generates revenues from its online properties, such as DogPile and Switchboard.

Update: It’s worth noting that only the portion of the revenues related to ringtones — or $55 million of the company’s almost $90 million in mobile revenues — will be affected.

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