CORRECTING and REPLACING FORTUNE Cover Story: Barry Diller's Controversial Internet Company.

Business Editors

CORRECTION...by FORTUNE

NEW YORK--(BUSINESS WIRE)--April 19, 2004

In BW5838 issued April 19, 2004: Company name in subheadline and first graph, second sentence of release should read: InterActiveCorp (sted InterActiveGroup).

The corrected release reads:

FORTUNE COVER STORY: BARRY DILLER'S CONTROVERSIAL INTERNET COMPANY

With $8 billion worth of deals in 18 months, is InterActiveCorp the real thing or just another house of cards?

Barry Diller has struck more than $8 billion worth of deals in 18 months, assembling an Internet conglomerate that includes Home Shopping Network, Ticketmaster, Citysearch, Expedia, LendingTree, Match.com, and other well-known brands. But is his Internet company, the InterActiveCorp, the real thing or just another house of cards? In next week's FORTUNE cover story, Bethany McLean interviews Diller and reports with an in-depth examination on the strengths and weaknesses of the various companies that fall under the IAC umbrella. "IAC is a company that can scare you and seduce you at the same time because it contains such a potent mix of reality and fantasy," writes McLean. McLean's story, "Diller.com," appears in the May 3 issue of FORTUNE, available on newsstands April 26 and at www.fortune.com.

Unlike the first round of dot-coms, most of IAC's businesses are not smoke and mirrors and IAC has real money in the bank: at least $3.3 billion. But though Diller has many true believers, skeptics warning signs, such iffy practices like inventing financial metrics, reports McLean, who cites IAC's use OIBA (operating income before amortization), which excludes all kinds of costs. In addition, "Diller's incessant dealmaking "is not just tortured in its complexity, but has resulted in numerous strategy shifts and five name changes," writes McLean.

Yet Diller's wheeling and dealing has achieved some undeniable results. IAC is cash-rich, and has done quite well for those shareholders who have stuck with him. IAC dates its founding to December 16, 1996; from that starting point IAC's stock has returned around 600 percent. In addition, Diller's deals have given rise to a company, that, to hear Diller and his executives tell it, is no longer a hodgepodge of assets but that actually makes coherent business sense.

IAC plans to almost triple its revenues in the next five years--from $6.3 billion today to $16.5 billion--while increasing profits at a 30% annual clip to $3 billion. In addition, IAC also plans to spend $1 billion this year on marketing - all to create what Diller has called "the largest, most profitable, e-commerce company in the world."

Synergy among the various businesses will be critical to this success. "It's the most important potential benefit we have," says Diller. "If we're right about just that, there will be enormous competitive advantages and very high barriers to entry." Even so, Diller concedes that the idea "should be treated skeptically. We haven't proven it yet." In addition, Diller admits the path ahead is not a straight one. "I'm never absolutely sure of anything," he says, "and I don't want to be. You're either right and you'll pull through, or you're not. We're never going to be right about everything, and we've certainly been wrong."

Ultimately, concludes McLean, it is exactly this willingness to question everything that makes Diller reassuring. "He is fully aware of the gritty realities that he faces in making the fantasy of IAC come true. He'll adjust to those realities if he has to. But just don't trash his fantasy."