AQuantive Revises Forecast Due to Razorfish

NEW YORK AQuantive adjusted its fourth-quarter and full-year guidance yesterday based on lower revenue and profit expectations, largely related to the Razorfish operations it acquired in July for $160 million.

The digital marketing and technology concern now expects Q4 revenue of $53-56 million and earnings per diluted share of 3-5 cents, assuming an income tax rate of 40 percent. For 2004, aQuantive narrowed its revenue guidance to $150-153 million from the previously projected $148-155 million, as well as its earnings forecast to 25-27 cents per diluted share from 24-28 cents per diluted share (before a onetime tax benefit in Q3).

“Razorfish margins are not that strong as we would like,” said aQuantive president and CEO Brian McAndrews during a conference call yesterday. “Razorfish’s business had historically been focused relatively more on growing revenues than on growing profits. However, as you know from an aQuantive track record, we focus on profit generation for our business units as a metric that we believe creates long-term shareholder value. As we put together our 2005 plan, we are working to ensure that the objectives are clear and that incentives are appropriately aligned to improve margins and profitability in the Razorfish business.”

The revised outlook was issued as a part of the Seattle-based company’s third-quarter earnings report. AQuantive shares (AQNT) closed on Nasdaq today at $8.00, down 16 cents or nearly 2 percent.

For the third-quarter, aQuantive posted net income of $3.5 million, or 5 cents per diluted share, which excludes an income tax credit of $20.6 million. In the year-earlier period, net income was $3.4 million, or 5 cents per diluted share.

Q3 revenue for aQuantive, which serves clients like AstraZeneca and Blockbuster Online, increased 201 percent to $46.7 million from $15.5 million during the same time last year. The Razorfish purchase contributed largely to the boost.

AQuantive’s digital marketing services segment, consisting of Avenue A/Razorfish and i-Frontier, recorded Q3 revenue of $28.3 million, compared to $7.3 million in the year-earlier quarter. Operating income in the quarter for these interactive agencies was $2.5 million, up from $1.7 million in Q3 2003.

Atlas DMT, OnePoint and NetConversions, which encompass aQuantive’s digital marketing technologies division, posted third-quarter revenue of $15.6 million, compared to $8.2 million a year ago. Operating income was $6.7 million, as opposed to $3 million in Q3 2003.

Its digital performance media segment had Q3 revenue of $2.8 million and an operating income of $99,000. That division was launched in April with the formation of Drivepm, a unit that buys ad inventory from online publishers and resells it to advertisers based on Web surfers’ past behavior, demographic makeup and geographic location, among other factors. British company MediaBrokers was bought and added to the division in July.