• by Mark Walsh  @markfwal, October 12, 2006

After recently losing a key carrier client, mobile media supplier InfoSpace Inc. said this week it would lay off 250 employees, or 40 percent of its workforce. In connection with the layoffs, InfoSpace said it would take pre-tax restructuring charges of up to $13.5 million in the third quarter.

As part of the restructuring, Chief Administrative Officer Ed Belsheim announced that he will step down Jan. 1. He resigned from the board on Oct. 9.

InfoSpace last month announced that one of its major wireless carrier customers--believed to be Cingular--would stop buying ringtones and graphics from InfoSpace and pursue direct relationships with record labels in early 2007. The Cingular contract, which was up for renewal this year, represents at least 28 percent of InfoSpace's revenues, according to investment bank WR Hambrecht.

Content aggregators such as InfoSpace face an increasingly competitive landscape as consumers look outside the "walled garden" of wireless portals for cheaper mobile content. InfoSpace operates its own direct-to-consumer mobile download site, Moviso. At the same time, major carriers such as Cingular are making more deals directly with media companies as they expand their content offerings.

In addition to its mobile business, InfoSpace also runs a search and directory segment that includes sites such as Infospace.com, Dogpile.com and Switchboard.com. The end of the Cingular deal could reduce InfoSpace's 2007 revenues by $125 million to $300 million, and earnings by fourfold--to a loss of 45 cents a share, according to a Sept. 21 research note issued by WR Hambrecht analyst Denise Garcia. Hambrecht reiterated its sell rating on the company, then trading at $17.50.