Kara Swisher

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Content Gains Allow Demand Media to Beat Wall Street Expectations on Q1 Earnings and Revenue


Demand Media, the online content company, said it had earned nine cents on an adjusted basis in the first quarter, on revenues of $100.6 million, topping Wall Street estimates of eight cents on $99.6 million in sales. On a fully diluted basis, earnings were one cent a share, or $700,000, compared to a loss of two cents, or $1.8 million, in the three months compared to a year ago.

“Strong growth from our owned & operated content and media properties drove our Q1 results, highlighting the unique capabilities of our content discovery, creation and distribution platform. Further, we accelerated our paid content strategy with the acquisition of Creativebug, a premier online destination for arts and crafts instruction, which will provide our large eHow crafts audience with an expanded learning experience. In addition, we signed up over 400 resellers to our new gTLD tools and received more than two million expressions of interest for domains to be registered with new gTLDs,” said Richard Rosenblatt, chairman and CEO of Demand Media in a statement. “We are excited about the distinct long-term growth opportunities for both of our businesses.”

Demand’s eHow site seems to have driven a lot of the gains in the content area.

Demand shares rose in trading yesterday by close to two percent, to close at $8.58, also its stock is down 7.6 percent for the year.

The company did not mention the planned split of its registar and content business that it announced in the last quarter in the current results, which might be covered on the conference call the Santa Monica, Calif. company will have with analysts at 2 pm PT.

In its last earnings release for the fourth quarter, Demand said it was spinning off its domain registrar business from its media one in a bid to better clarify the company to investors.

Since it went public several years ago, there has been some level of difficulty for each part of Demand to easily explain itself to Wall Street, given the very different natures of its key — but very different — revenue units. In a statement at the time, Demand said that it was “our intent to spin off our registrar business and separate into two independent, publicly traded companies.”

The company noted that the two units “divergent strategic priorities and opportunities” would be better in the new configuration with a pure-play media company and domain services company. At the time, the company said the transaction was expected to take place in the next nine to 12 months, although it required a number of company and regulatory approvals to do the tax-free spin-off to create two different stocks.

In a different kind of transaction, Demand had talked a little more than a year ago to a private equity company about taking the company private. The effort was abandoned, in which Boston-based Thomas H. Lee Partners would have purchased Demand for a price of up to $1.2 billion, due to a number of challenges. Its current market valuation is now about $744 million.

Until we hear more about the spin-off plans from Demand execs, here’s the full release from Q1 to peruse:


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