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Article by DailyStocks_admin    (03-24-08 06:37 AM)

Filed with the SEC from Mar 13 to Mar 19:

Move (MOVE) David Nierenberg's D3 Family Funds raised their stake to 11.77 million shares (7.8%) from the 9.93 million (6.6%) reported on March 7. Nierenberg has recently called for Move's board to dismiss CEO Mike Long and CFO Lew Belote. He also called for the company to sell its money-losing businesses.

BUSINESS OVERVIEW

OVERVIEW

Move, Inc. and its subsidiaries (“Move”, “we”, “our” or “us”) operate the leading online network of web sites for real estate search, finance, moving and home enthusiasts and is the essential resource for consumers seeking the information and connections they need before, during and after a move. Our flagship consumer web sites are Move.com tm , REALTOR.com ® and Moving.com. We also provide lead management software for real estate agents and brokers through our Top Producer ® business and local merchant and community information to new movers through our Welcome Wagon ® business.

On our web sites we display comprehensive real estate property content, with over four million resale, new home and rental listings, as well as extensive move-related information and tools. We hold a significant leadership position in terms of web traffic, attracting an average of 8.5 million consumers to our network per month in 2007 according to comScore Media Metrix, a substantial lead over the number two real estate site. We also have strong relationships with the real estate industry, including content agreements with approximately 900 Multiple Listing Services (“MLS”) across the country and exclusive partnerships with the National Association of REALTORS ® (“NAR”) and the National Association of Home Builders (“NAHB”).

Our vision is to revolutionize the American dream of home ownership. A home is the single largest investment in most people’s lives, and we believe a tremendous opportunity exists to help transform the difficult process of finding a place to live into the emotional connection of home. Our mission is to be the most trusted source for real estate online.

The strategy for realizing our vision is built upon three pillars:


• Build the leading real estate search experience: providing the greatest breadth and depth of property listings coupled with rich, timely neighborhood information in a superior, consumer-friendly search experience to enable us to be the most used real estate search engine and the most trusted consumer site.

• Integrate proprietary home and listings-related content: integrating content such as neighborhood and community information to improve decision-making and the enjoyment of home will enable us to convert real estate search users into recurring users and broaden our advertiser base.

• Improve relevance and effectiveness of advertising: aggregating the largest audience of prospective and current homeowners and renters and understanding their behavior, demographics, needs and intent to allow us to deliver contextually relevant ads targeted to the right consumer at the right time.

We operate under two business segments: Real Estate Services and Consumer Media (formerly referred to as “Move-Related Services”), which for the year ended December 31, 2007, represented approximately 77% and 23% of our revenue, respectively. For information regarding the results of operations of each of our segments, see “Management’s Discussion and Analysis of Financial Conditions and Results of Operations” contained in Item 7 and Segment Data contained in Note 12 to our Consolidated Financial Statements in Item 8 of this Form 10-K.

We generate a substantial majority of our revenue from selling advertising and marketing solutions to real estate industry participants, including real estate agents, homebuilders and rental property owners, as well as to other local and national advertisers interested in reaching our consumer audience. Most of our revenue is derived from subscription-based services that allow our customers to easily budget for our services. Our sales force consists of a combination of internal phone-based account executives and field sales personnel.

We were incorporated in the State of Delaware in 1993 under the name of InfoTouch Corporation. In February 1999, we changed our corporate name to Homestore.com, Inc. In May 2002, we changed our name to Homestore, Inc. In June 2006, we changed our name to Move, Inc. See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for a further description of our history. Our corporate headquarters is located in Westlake Village, California. Our phone number is (805) 557-2300. Our periodic and current reports are available, free of charge, on our web site, http://investor.move.com, as soon as possible after such material is electronically filed with, or furnished to, the SEC.

REAL ESTATE SERVICES

Real Estate Services incorporates all revenue and associated costs for products and services sold to real estate professionals, including real estate agents and brokers, new home builders, and rental owners or operators. We provide marketing solutions to help real estate professionals reach and connect with the highly targeted consumer audience we have attracted to our web sites. Real Estate Services is comprised of our REALTOR.com ® , Top Producer ® and Move ® New Homes and Rentals businesses.

REALTOR.com ®

The REALTOR.com ® web site offers consumers a comprehensive suite of services, tools and content for all aspects of the residential real estate transaction. We display on REALTOR.com ® listing content received from approximately 900 MLSs across the United States, resulting in a searchable database of approximately four million existing homes for sale. Half of our listings are updated more than once daily and over one million are updated every fifteen minutes, providing the most comprehensive and timely content available on the Internet.

In addition to property listings and neighborhood profiles, we offer consumers information and tools designed to assist them in understanding the value of their home, preparing the home for sale, listing and advertising the home, home affordability, the offer process, applying for a loan and understanding the mortgage options available, closing the purchase and planning the move.

REALTOR.com ® is the official web site of NAR, the largest trade association in the United States that represents residential and commercial real estate professionals, including brokers, agents, property managers, appraisers, counselors and others engaged in all aspects of the real estate industry. NAR had approximately 1.3 million members as of December 31, 2007. Under our agreement with NAR, we operate REALTOR.com ® , and as such we present basic MLS property listings on the web site at no charge to real estate professionals.

We offer the following services to enable real estate professionals to manage their online content and branding presence and better connect with home buyers and sellers:

Showcase Listing Enhancements. When an agent or broker purchases the enhanced listing product they are then able to promote their listings by adding more photos, virtual tours, video and printable brochures to the basic listing. They can also personalize the listing by adding custom copy, text effects, their own personal branding information, links to their personal web site and more. Enhanced listings are priced based on the size of a geographic market and the number of annual listings an agent may have, and are sold on an annual subscription basis. Historically we have sold enhanced listings directly to individual real estate agents. During 2006 and 2007, we experienced an increase in real estate brokers purchasing enhanced listings on behalf of their agents. Our listing enhancement product represented approximately 31%, 26%, and 23% of our overall revenue for fiscal years 2007, 2006 and 2005, respectively;

Display ad products. We provide numerous opportunities for real estate professionals to promote individual properties, themselves or their company brand. These products are priced based on geographic market and are sold on a three, six or twelve month subscription bases:


• Featured Homes tm allows agents or brokers to more prominently display a limited number of their property listings on the REALTOR.com ® web site by presenting them first in certain searches of their respective zip codes;

• Featured Agent tm , Featured Company tm and Featured Community tm all provide the opportunity for agents or brokers to promote themselves and their services on REALTOR.com ® in the form of banner advertising within a geographically targeted real estate audience; and

• Featured CMA tm allows agents or brokers to present consumers with information about their local market conditions and, in the process, recognize the value of contacting them for professional consultation and assistance.

Our Featured Homes product represented approximately 11%, 11%, and 10% of our overall revenue for fiscal years 2007, 2006 and 2005, respectively; and

Web sites. We design, host, and maintain personal and corporate web sites for real estate professionals. We offer a series of template web sites designed specifically for agents and brokers, which are sold on an annual subscription basis. The Enterprise, our media design and production business unit, designs and builds customized web sites for brokerage customers seeking web sites with specialized features and expanded functionality. Such websites can display listings for a broker’s local market using Internet Data Exchange (“IDX”) protocols and technology. We support IDX data feeds in approximately 300 markets.

Top Producer ®

Our primary Top Producer product, “7i tm ”, is the leading customer relationship management (CRM) software designed specifically for real estate agents. Top Producer’s 7i web-based application features client management, appointment and task scheduling, Internet lead distribution and follow-up, prospecting automation, comparative market analysis, customer presentations and mobile data synchronization. Products are co-branded for some of the country’s largest franchise brands, such as RE/MAX, Keller Williams, Coldwell Banker, Century 21, ERA, GMAC and Real Estate One. We believe that our ability to assist real estate professionals in managing relationships with their customers enables us to better distinguish the value of our media properties. We recently introduced “8i”, an upgraded version of our product that provides greater ease of use, performance and better custom branding. All current users will have the ability to upgrade to this expanded offering at no additional charge.

The Top Producer CRM software is offered exclusively as a web-based application that is purchased through an initial annual subscription. We currently have over 65,000 subscribers using the web-based CRM software. Our 7i product represented approximately 10% of our overall revenue for fiscal year 2007.

We also offer Market Snapshot tm and Market Builder tm , products that allow real estate professionals to effortlessly provide real-time MLS market updates and trend analysis to their online prospects and clients. Market Snapshot and Market Builder are currently purchased through an annual subscription and are available on a stand alone basis, or bundled with 7i and other Top Producer products.

Move ® New Homes

The Move New Homes channel of Move.com is the official new homes listing site of the National Association of Home Builders. We aggregate and display new home listings nationwide. We display these listings at no charge to consumers or to home builders. The primary services we offer home builders to enhance, promote and supplement those listings are the following:

Showcase listings. Showcase listings allow home builders to promote their listings by giving them priority placement, adding enhanced property descriptions, highlighting unique property amenities, displaying multiple photos, elevations and plans, offering interactive floor plans, and more. Showcase listings are sold on a monthly subscription basis; and

Featured Listings. Featured Listings allow home builders to obtain priority placement for their listings on the search results page. The Featured Listings displayed in the top positions are based on consumer-defined criteria and the relevancy of listing detail to those criteria. Featured Listings are offered on a cost-per-click basis.

Move ® Rentals

We aggregate and display rental listings nationwide. We display these listings at no charge to consumers or to rental owners and managers. We offer the following services to enable rental property owners and managers to enhance, promote and supplement those listings:

Showcase listings. Showcase listings allow rental property owners and managers to promote their listings by giving them priority placement, adding enhanced property descriptions, highlighting unique property amenities, displaying multiple photos, offering interactive floor plans and more. Showcase listings are sold on a monthly subscription basis; and

Featured Listings. Featured Listings allow rental property owners and managers to obtain priority placement for their listings on the search results page. The Featured Listings displayed in the top positions are based on consumer-defined criteria and the relevancy of listing detail to those criteria. Featured Listings are offered on a cost-per-click basis.

CONSUMER MEDIA

Our Consumer Media segment provides advertising products and lead generation tools including display, text-link and rich media advertising positions, directory products, price quote tools and content sponsorships on our Move.com and other related web sites, as well as lead generation products for professional moving, truck rental, and self-storage businesses on our Moving.com web site. In addition, Consumer Media includes our Welcome Wagon ® new-mover direct mail advertising products.

Welcome Wagon ®

Our Welcome Wagon business offers local and national merchants the opportunity to reach movers through targeted and personalized direct mail services. The Welcome Wagon “New Mover” program integrates local merchant and national advertiser information into a welcome gift delivered through the mail to new homeowners shortly after their move. The welcome gift contains a customized neighborhood address book with merchant advertiser listings as well as coupons and special offers from local and national advertisers. Advertisers typically pay for the product on an annual contract basis, but we recognize revenue when we deliver impressions by mailing the product. The Welcome Wagon gift book represented approximately 11%, 12% and 13% of our overall revenue for fiscal years 2007, 2006 and 2005, respectively.

Additionally, our Welcome Wagon business offers local merchants solo marketing opportunities through its Pinpoint Mail tm product, which is sold on a per mailing basis, and its Early Advantage tm product is designed for advertisers who wish to reach new movers at their existing addresses prior to their actual move.

Media (formerly Retail Advertising)

Our Media business provides advertisers such as mortgage companies, home improvement retailers, moving service providers and other consumer product and service companies with an efficient way to target consumers in the move cycle. We offer these advertising customers a variety of products and services across the entire Move network of web sites, particularly in our Finance, Moving and Home & Garden content areas on Move.com. These products and services include graphical display advertisements, text links, sponsorships and directories. Pricing models include cost per thousand impressions (“CPM”), cost-per-click and subscription based sponsorships of specific content areas.

We also provide consumers with quotes from moving companies, truck rental companies and self-storage facilities, as well as other move-related information, on our Moving.com web site. The majority of revenue for Moving.com is derived from cost-per-lead products.

Homeplans

In the fourth quarter of 2007, we decided to divest our Homeplans business, which had been reported as part of our Consumer Media segment. We are actively marketing the business for sale and expect to complete a transaction in 2008. As a result, the operating results of this business have been reclassified as discontinued operations and the assets and liabilities for this business have been reclassified as assets and liabilities from discontinued operations on the balance sheet for all periods presented.

COMPETITION

We face competition in each segment of our business.

Real Estate Services

We compete with a variety of online companies and web sites providing real estate content that sell classified advertising opportunities to real estate professionals and sell advertising opportunities to other advertisers seeking to reach consumers interested in products and services related to the home and real estate. We also compete with web sites that attract consumers by offering rebates for home purchases or rental leases, and then charge the real estate professional who performed the transaction a referral fee for the introduction. However, these sites generally have a limited amount of real estate content and an even more limited directory of qualified REALTORS ® .

Our primary competitors for online real estate advertising dollars include Yahoo! Real Estate, LendingTree (a division of IAC/InterActiveCorp), HouseValues.com, HomeGain (a division of Classified Ventures, LLC), Trulia, Zillow and Google. In addition, our Move ® Rentals web site faces competition from ApartmentGuide.com, Rent.com, ForRent.com and Apartments.com, and our Move ® New Homes web site competes directly with NewHomeGuide.com, iNest (a division of IAC/InterActiveCorp) and NewHomeSource.com. Our Move.com web site also faces competition from general interest consumer web sites that offer home, moving and finance content, including ServiceMagic, Inc. (a division of IAC/InterActiveCorp), GigaMoves (a division of eBay), and Living Choices (a division of Network Communications, Inc.).

The barriers to entry for web-based services and businesses are low. While we believe we would have an advantage on listing content for some time over other online businesses, we may not be able to maintain that advantage forever, and they could create other products and services that could be more attractive to consumers.

Newspapers and home/apartment guide publications are the two primary offline competitors of our media offerings. We compete with newspapers and home/apartment guide publications for the advertising dollars spent by real estate professionals to advertise their offerings. In addition, newspapers and the publishers of home/apartments guides, including Classified Ventures, Inc., PRIMEDIA Inc., and Network Communications, Inc., have extended their media offerings to include an Internet presence. We must continue to work to shift more real estate advertising dollars online if we are to successfully compete with newspapers and real estate guides.

Our Top Producer ® business faces competition from First American’s MarketLinx, Inc. subsidiary and Fidelity National Information Solutions, Inc. which offers competing solutions to real estate professionals. Top Producer also competes with horizontal customer relationship management offerings such as Microsoft Corporation’s Outlook solution, Best Software Inc.’s ACT! solution, Salesforce.com and FrontRange Solution, Inc.’s GoldMine product. Some providers of real estate web site solutions, such as A La Mode, Inc., also offer contact management features which compete with products from Top Producer. Certain Internet media companies such as HomeGain and HouseValues, Inc. are providing drip marketing solutions that incorporate aspects of lead management, which over time could pose a competitive threat to Top Producer.

Consumer Media

Our Welcome Wagon ® business competes with numerous direct marketing companies that offer advertising solutions to local and national merchants. Competitors include Imagitas, Inc., ADVO Inc., Valpak Direct Marketing Systems, Inc., Pennysaver and MoneyMailer, LLC. These competitors, like Welcome Wagon, target homeowners at various stages of the home ownership life cycle with advertising from third parties.

Our Moving.com business competes with other web sites that offer comparable products, such as 123movers.com and VanLines.com.

SEASONALITY

Our Welcome Wagon ® business in our Consumer Media segment is the one most affected by seasonality. Our revenue in this line of business is significantly impacted by the number of household moves in the United States each year. Due to weather and school calendars, a disproportionate percentage of moves take place in the second and third calendar quarters relative to the first and fourth quarters. As a result, we distribute a larger number of our Welcome Wagon new mover gift books in the second and third quarters each year.

Also, traffic generally declines on all our web sites during the fourth quarter due to weather and the holiday season when consumers are less likely to search for real estate. Historically, this has caused revenue from our Media business (formerly Retail Advertising) to decline in the fourth quarter, as this business includes revenue models that are directly tied to traffic levels.

GEOGRAPHIC REGIONS

We derive all of our revenue from our operations in North America.

INFRASTRUCTURE AND TECHNOLOGY

We seek to maintain and enhance our market position with consumers and real estate professionals by building proprietary systems and consumer features into our web sites, such as search engines for real estate listings and the technologies used to aggregate real estate content. We regard many elements of our web sites and underlying technologies as proprietary, and we attempt to protect these elements and underlying technologies by relying on trademark, service mark, patent, copyright and trade secret laws, restrictions on disclosure and other methods. See “Intellectual Property” below.

Our web sites are designed to provide fast, secure and reliable high-quality access to our services, while minimizing the capital investment needed for our computer systems. We have made, and expect to continue to make, technological improvements designed to reduce costs and increase the attractiveness to the consumer and the efficiency of our systems. We expect that enhancements to our web sites, and our products and services, will come from internally and externally developed technologies.

Our systems supporting our web sites must accommodate a high volume of user traffic, store a large number of listings and related data, process a significant number of user searches and deliver frequently updated information. Significant increases in utilization of these services could potentially strain the capacity of our computers, causing slower response times or outages. During 2006, we relocated all of our data systems operations from a facility in Thousand Oaks, California to Phoenix, Arizona. We now host our Move.com, REALTOR.com ® , Moving.com, and Welcome Wagon ® web sites, as well as custom broker web pages and the on-line subscription product for Top Producer ® in Phoenix, Arizona. See “ Risk Factors — Internet Industry Risks” for a more complete description of the risks related to our computer infrastructure and technology.

CEO BACKGROUND

Joe F. Hanauer has served as one of our directors since November 1996, as vice chairman of the board from November 2001 to January 2002, chairman of the board since January 2002 and lead independent director since December 2004; he was the National Association of REALTORS® representative on the board through November 2000. Mr. Hanauer is a Class III director. Since 1988, Mr. Hanauer, through Combined Investments, L.P., has directed investments in companies primarily involved in real estate and financial services. Mr. Hanauer is a former chairman and director of Grubb & Ellis Company and a former chairman of Coldwell Banker Residential Group, Inc. Mr. Hanauer is a director of MAF Bancorp, Inc., a trustee of each of Calamos Investment Trust, Calamos Advisors Trust and Calamos Convertible Opportunities and Income Fund, and a member of the National Association of REALTORS®. Mr. Hanauer serves as one of our representatives on the Policy Advisory Board of the Joint Center for Housing Studies at Harvard University.

Fred D. Anderson has served as one of our directors (as one of two Elevation representatives) since December 2005. Mr. Anderson is a Class II director. Mr. Anderson co-founded and has been a managing director of Elevation Partners, L.P., a private equity firm focused on the media and entertainment industries, since July 2004. From March 1996 to June 2004, Mr. Anderson served as executive vice president and chief financial officer of Apple Inc., a manufacturer of personal computers and related software. Prior to joining Apple, Mr. Anderson was corporate vice president and chief financial officer of Automatic Data Processing, Inc., an electronic transaction processing firm, from August 1992 to March 1996. On April 24, 2007, the Securities and Exchange Commission (“SEC”) filed a complaint against Mr. Anderson and another former officer of Apple Inc. The complaint alleged that Mr. Anderson failed to take steps to ensure that the accounting for an option granted in 2001 to certain executives of Apple, including himself, was proper. Simultaneously with the filing of the complaint, Mr. Anderson settled with the SEC, neither admitting nor denying the allegations in the complaint. In connection with the settlement, Mr. Anderson agreed to a permanent injunction from future violations of Sections 17(a)(2) and 17(a)(3) of the Securities Act of 1933 and Section 16(a) of the Securities Exchange Act of 1934 and Rules 13b2-2 and 16a-3 thereunder, and from aiding and abetting future violations of Sections 13(a), 13(b)(2)(A), 13(b)(2)(B) and 14(a) of the Securities Exchange Act of 1934 and Rules 12b-20, 13a-1, 13a-13, and 14a-9 thereunder. He also agreed to disgorge approximately $3.5 million in profits and interest from the option he received and to pay a civil penalty of $150,000. Under the terms of the settlement, Mr. Anderson may continue to act as an officer or director of public companies. Mr. Anderson also serves on the board of directors of eBay, Inc.

L. John Doerr has served as one of our directors since August 1998. Mr. Doerr is a Class III director. Mr. Doerr has been a general partner of Kleiner Perkins Caufield & Byers, a venture capital firm, since 1980. Prior to his tenure at Kleiner Perkins, Mr. Doerr was employed by Intel Corporation for five years. He serves on the board of directors of Amazon.com, Inc., Google Inc. and Intuit Inc.

William E. Kelvie has served as one of our directors since August 1998. Mr. Kelvie is a Class II director. He has served as chief executive officer of Overture Corporation, an information technology company, since July 2000. Prior to his tenure at Overture Corporation, Mr. Kelvie was the executive vice president and chief information officer responsible for information technology systems at the Federal National Mortgage Association (Fannie Mae), the world’s largest non-bank financial services company, from 1992 to 2000. Mr. Kelvie joined Fannie Mae in 1990 as senior vice president and chief information officer. Prior to his tenure at Fannie Mae, Mr. Kelvie was a partner with Nolan, Norton & Co., a management consulting company specializing in information technology strategies and plans. He also served in various capacities with The Dexter Corporation, a specialized manufacturing company, and The Travelers Insurance Company, an insurance and financial services company.

Kenneth K. Klein has served as one of our directors since August 1998. Mr. Klein is a Class II director. He is president and chief executive officer of a privately held group of companies involved in diversified residential and light commercial construction and land development, including Kleinco Construction Services, Inc., of which Mr. Klein has served as president and chief executive officer since 1980. Mr. Klein was national vice president of the National Association of Home Builders during the calendar years 1999 and 2000. He serves on the board of directors of First Fidelity Bank, an Oklahoma based regional bank, and Habitat for Humanity International.

Geraldine B. Laybourne has served as one of our directors since June 2006. Ms. Laybourne is a Class II director. In 1998, Ms. Laybourne founded Oxygen Media, LLC, an independent cable television network with programming tailored to the interests of women, and has served as its chairman and chief executive officer since its inception. Prior to starting Oxygen, Ms. Laybourne spent many years at Nickelodeon, a programming affiliate of MTV Networks, having served in a number of roles from 1980 to 1995, including as its president from 1989 to 1992. From 1993 to 1995, Ms. Laybourne also served as the vice chairman of MTV Networks. From 1996 to 1998, she served as the president of Disney ABC Cable Networks. She currently serves on several boards and advisory committees, including Insight Communications Company, Inc., Vassar College, The National Cable & Telecommunications Association, The National Council for Families and Television, and Cable Positive.

W. Michael Long has served as our chief executive officer and as one of our directors since January 2002. Mr. Long is a Class III director. From November 1999 to April 2001, Mr. Long served as chairman of the board and as a director of Healtheon/WebMD Corporation (“Healtheon/WebMD;” now known as Emdeon Corporation), a provider of healthcare information services and technology solutions. From July 1997 to November 1999, Mr. Long served as chief executive officer of Healtheon Corporation. From August 1996 to July 1997, Mr. Long served as president and chief executive officer of CSC Continuum, Inc., a unit of Computer Sciences Corporation. Prior to its acquisition by Computer Sciences Corporation, Mr. Long was president and chief executive officer of The Continuum Company, Inc.

Roger B. McNamee has served as one of our directors (as one of two Elevation representatives) since December 2005. Mr. McNamee is a Class I director. Mr. McNamee co-founded and has been a managing director of Elevation Partners, L.P., since July 2004. Prior to joining Elevation, Mr. McNamee was a co-founder of Silver Lake Partners, a private equity firm, where he is also an advisory director. In 1991, Mr. McNamee co-founded the investment firm Integral Capital Partners, where he is currently an advisory director of the general partner of Integral’s most recent investment fund and continues as a managing member of the general partner of its previous investment funds. Prior to founding Integral, Mr. McNamee managed the T. Rowe Price Science & Technology Fund and co-managed the T. Rowe Price New Horizons Fund.

V. Paul Unruh has served as one of our directors since May 2003. Mr. Unruh is a Class I director. For 25 years, Mr. Unruh worked at Bechtel, a privately held global engineering and construction services organization. Prior to his retirement in 2002, Mr. Unruh served as vice chairman of Bechtel Group, Inc. from January 2001 to December 2002 and president of Bechtel Enterprises, a development and financing subsidiary, from July 1997 to January 2001. His previous responsibilities at Bechtel included both operating and financial positions, including chief financial officer, treasurer and controller. Prior to joining Bechtel in 1978, Mr. Unruh practiced as a certified public accountant with what is now PricewaterhouseCoopers LLP for seven years. Mr. Unruh is currently a director of Symantec Corporation, a software company, and Heidrick & Struggles International, Inc., a provider of senior-level executive search and leadership services.

Bruce G. Willison has served as one of our directors since December 2002. Mr. Willison is a Class I director. Since January 2006, Mr. Willison has served as Professor of Management of the UCLA Anderson School of Management. From 1999 to December 2005, Mr. Willison served as Dean of the UCLA Anderson School of Management. This appointment followed a 26-year career in the banking industry, most recently as president and chief operating officer of H.F. Ahmanson & Co., the parent company of Home Savings of America. Prior to that, Mr. Willison held several executive positions at First Interstate Bancorp, including chairman and chief executive officer of First Interstate’s Oregon operations and chairman, president, and chief executive officer of First Interstate Bank of California, as well as vice chairman of the bank’s holding company, First Interstate Bancorp. Mr. Willison began his banking career at Bank of America Corp. in 1973. Mr. Willison is a director of Health Net, Inc., an integrated managed care organization, and IndyMac Bancorp, Inc., the parent company of IndyMac Bank.

Alan Yassky has served as one of our directors (as the National Association of REALTORS® representative) since June 2005. Mr. Yassky is a Class I director. Mr. Yassky has served as the representative of the National Association of REALTORS® on the board of directors of RealSelect, Inc., a wholly-owned subsidiary of the Company, since December 2000. Mr. Yassky has been a REALTOR® since 1964, and has served as a director of the National Association of REALTORS® since 1984. From 1997 to 2000, Mr. Yassky additionally served as treasurer for the National Association of REALTORS®. Mr. Yassky also founded Rockland Realty in 1964, a real estate firm in New York, which he continues to operate as co-owner.

Lewis R. Belote, III has served as our chief financial officer since January 2002. From May 1998 to April 2001, Mr. Belote served as senior vice president, finance of Healtheon/WebMD (now known as Emdeon Corporation). From June 1996 to May 1998, Mr. Belote served as senior vice president and chief financial officer for ActaMed Corporation. Prior to 1996, Mr. Belote served for twelve years with the accounting firm of Ernst & Young LLP.

Jack D. Dennison has served as our chief operating officer since January 2002. From July 1998 to January 2001, Mr. Dennison served as executive vice president, general counsel and secretary of Healtheon/WebMD (now known as Emdeon Corporation). From 1996 to July 1998, Mr. Dennison served as vice president and deputy general counsel to Computer Sciences Corporation. Prior to that time, Mr. Dennison was general counsel at The Continuum Company, Inc.

James S. Caulfield has served as our executive vice president, general counsel and secretary since October 2006. Mr. Caulfield has been a member of our legal department since February 2004 and has also served as our senior vice president, deputy general counsel and assistant secretary from March 2006 to October 2006. Prior to joining us, Mr. Caulfield was vice president and general counsel of Lincoln Financial Advisors Corporation, a financial planning firm, from March 2002 to February 2004. Mr. Caulfield has also served as counsel and executive vice president of E.W. Blanch Holdings, Inc., a corporate attorney of Fibreboard Corporation and a corporate associate with the law firm of Bingham McCutchen, LLP.

Allan D. Dalton has accepted a new position with us as of February 2007 to lead a new business venture creating new products and services for sale to consumers and real estate professionals. From December 2006 to February 2007 he served as president of our Real Estate Services Division. From October 2002 to December 2006, Mr. Dalton was president and chief executive officer of REALTOR.com®, one of our consumer websites and the official Internet site of the National Association of REALTORS®. From August 2002 to October 2002, Mr. Dalton served as executive vice president of Coldwell Banker New England Metro, the largest real estate services organization in New England. From January 1998 to August 2002, Mr. Dalton was senior vice president of NRT Incorporated. Mr. Dalton’s 20-plus year career in the real estate industry includes 16 years as president and co-owner of an independent real estate brokerage with more than 30 offices. He has also served as executive vice president of Coldwell Banker Hunneman.

Allan P. Merrill has served as our executive vice president of strategy and corporate development since October 2001. From April 2000 to October 2001, Mr. Merrill was president of HomeBuilder.com®, one of our consumer websites (now a part of www.move.com ). Mr. Merrill joined us following a 13-year tenure, from 1987 to March 2000, with the investment banking firm Warburg Dillon Read (now UBS Investment Bank), where he was a managing director and last served as co-head of the Global Resources Group, overseeing the construction and building materials, chemicals, forest products, mining and energy industry groups. Mr. Merrill serves as one of our representatives on the Policy Advisory Board of the Joint Center for Housing Studies at Harvard University.

Errol G. Samuelson has served as one of our executive vice presidents and president of REALTOR.com® since February 2007. Since August 2003, Mr. Samuelson has served as senior vice president of operations of Top Producer and then as president of Top Producer. From January 2002 to August 2003, Mr. Samuelson was an independent consultant and co-founder/principal of the consulting firm Pranix, Inc. From January 2001 to December 2001, Mr. Samuelson also served as our director of international marketing and vice president of product strategy.

Eric Thorkilsen has served as president of our Move-Related Services division since December 2006. Immediately prior to joining us, Mr. Thorkilsen was founder and managing partner at Lifestyle Media Partners, a company focused on providing leading media brand producers with counsel, business strategy development, and execution expertise as they pursue development of multi-media platforms. From January 2005 to March 2006, Mr. Thorkilsen served as senior vice president of business development and directed all multi-media brand development and extensions for the HGTV, the Food Network, DIY, Fine Living and Great American Country properties for the E.W. Scripps Company, a multimedia holding company. From 1973 to December 2004, Mr. Thorkilsen held several positions at Time Warner Inc., a media and entertainment company, including: president of This Old House Ventures, Inc., president and publisher of This Old House magazine, publisher of Martha Stewart Living magazine and president of Martha Stewart Living television.

Lisa L. Farris has served as our chief marketing officer since November 2006. Ms. Farris served as our senior vice president of marketing from July 2006 until November 2006, and as an independent marketing consultant to us from April 2006 through June 2006. From January 2004 through January 2006, she was founder and general manager of Wondernation, an entertainment company providing educational programming for young children. From August 1997 through December 2003, Ms. Farris held strategic marketing roles within Universal Music Group, including Vice President, Strategic Marketing for MCA Records and Senior Vice President of Market Development for Universal Music Group’s eLabs.

COMPENSATION


Non-employee directors (other than any director who is entitled to a seat on our board of directors on a contractual basis) receive an annual retainer of $25,000 in cash, which is paid in quarterly installments. Each committee chair receives an additional annual retainer of $5,000 in cash, except the chairman of the audit committee who receives $10,000 in cash. Each of the non-employee directors (other than any director who is entitled to a seat on our board of directors on a contractual basis) also receives $1,500 in cash per meeting for each board meeting attended in person (and $1,000 for each telephonic meeting) that requires a significant commitment of time. In addition, members of the committees of the board receive $2,000 for attending an audit committee meeting or $1,500 for each other committee meeting attended (and $1,500 for each telephonic audit committee meeting or $1,000 for each other telephonic committee meeting) that requires a significant commitment of time. Mr. Hanauer, in his capacity as chairman of the board, receives an additional annual retainer of $70,000 in cash, which is paid in quarterly installments.

In June 2006, each non-employee director (other than any director who is entitled to a seat on our board of directors on a contractual basis) was granted 12,500 restricted shares of our common stock under our 1999 Stock Incentive Plan. Mr. Hanauer, in his capacity as chairman of the board, was granted an additional 12,500 restricted shares. As a new director in 2006, Ms. Laybourne was granted an additional 9,500 restricted shares. No stock options were included as part of these 2006 grants to directors. Each restricted stock award will vest three years after the grant date. All restricted stock will immediately vest if the director is not nominated for re-election, is nominated for re-election and is not elected, or must resign due to health reasons, or upon such director’s death. Upon a director’s resignation or termination for other reasons, including but not limited to business conflicts with us, all of the director’s unvested restricted stock will terminate immediately. Our employee directors do not receive any compensation for their services as a director.

Annual Cash Compensation

* Base Salary

Base salary is the fixed element of the executive’s annual cash compensation. The value of base salary reflects the named executive’s level of responsibility, relative experience and breadth of knowledge. Base salaries are evaluated annually but are not automatically increased if the Committee believes that other elements of compensation are more appropriate in light of our stated objectives. This strategy is consistent with the Company’s primary intent of weighting compensation towards achieving performance objectives.

* Cash Incentive

The Committee, with input from the CEO, annually establishes a bonus plan for each named executive officer. The bonus plan sets forth the executive’s individual and Company performance goals and bonus potential. Because the executives have an increased ability to affect the Company’s financial results, the Committee links an increased proportion of their pay to Company financial performance. In fiscal year 2006, 60% of Messrs. Long, Belote, Dennison and Merrill’s potential cash incentive compensation was based on the financial performance of the Company assessed against pre-determined cash operating income and revenue targets established by the Committee, and 40% of their potential cash incentive compensation was based on the achievement of the individual objectives established for each of these executives. As discussed under “Executive Compensation for 2006” below, with respect to Mr. Dalton, 80% of his potential cash incentive compensation was tied to Company and business unit financial goals, and 20% was based on individual performance goals.

Equity Awards

* Stock Options and RSUs

The Company relies heavily on long-term equity based compensation to compensate and incentivize its executive officers. The Committee’s practice is to authorize stock option grants based on employee performance and value to the Company, and to use grants to attract and hire talented professionals in key positions in a highly competitive market. The Committee does not have a policy that creates automatic option grants each year, but instead reviews option awards annually for the executives and other key Company employees. In March of 2007, the Committee adopted a policy, formalizing its practice since 2002, such that all option grants are subject to its approval except that the Committee has delegated to the CEO the authority make stock option grants to employees of 25,000 or fewer shares, provided that no option grants may be made by the CEO to any officer of the Company who is subject to the reporting requirements of Section 16(a) of the Securities Exchange Act of 1934 without the prior approval of the Committee.

Stock options typically have been granted by the Committee to executive officers, in connection with a significant increase in responsibilities, and periodically to achieve the retention objective. Grants are based on the executive’s level of responsibility, anticipated future contribution to Company and/or business unit results, past performance, peer group and comparable company data, and other relevant factors. As noted above, the Committee considers the grant size and the appropriate combination of stock options and RSUs when making award decisions but does not adhere to any set formula for making such allocations.

When determining the appropriate combination of stock options and RSUs, the Committee also weighs the accounting cost of these grants with their potential benefits as a compensation tool. The Committee believes that combined grants of stock options and RSUs can balance the objective to motivate the named executives to deliver long-term value to our stockholders, with rewarding the executive’s performance. Stock options only have value to the extent the price of the Company stock on the date of exercise exceeds the exercise price on grant date, and thus are an effective compensation element only if the stock price grows over the term of the award. In this sense, stock options are a motivational tool and align management’s interests with stockholders. Unlike stock options, RSUs offer executives the opportunity to receive shares of Company stock on the date of vesting, but are contingent upon achieving certain Company financial performance targets established by the Committee. In this regard, RSUs serve to reward, motivate and retain executives, as the value of the Company’s stock will be enhanced if the performance targets are met.

* Grant Timing and Price

Annual equity incentive grants were made at the Committee’s June 22, 2006 meeting. In March of 2007, the Committee adopted a policy, formalizing its practice, such that option awards, are generally non-qualified options and are granted on the date the Committee or CEO acts to approve such awards and shall be exercisable at the “fair market value” on such date of grant. Under the policy, option grants to executive officers and other key employees recommended by the CEO are generally considered annually in connection with the Committee’s year-end review of management performance and executive compensation, notwithstanding the timing of the Company’s annual earnings release or other disclosures. Therefore, we do not coordinate the timing of equity award grants with the release of material nonpublic information.

Other Elements

* Employment Agreements and Severance Benefits

In 2002, the Company entered into employment agreements with Messrs. Long, Belote and Dennison, and executive severance and retention agreements with Messrs. Dalton and Merrill. The agreements allow us to retain and attract highly-qualified executives, and also ensure the continued employment and dedication of our executive officers. Change in control benefits align executive and stockholder interests by enabling the executives to consider change in control arrangements that are in the best interests of the stockholders and other constituents of the Company without undue concern over whether the transaction would jeopardize their own employment. The potential severance and change in control benefits are more fully described below in “Potential Payments upon Termination or Change in Control”.

* Retirement and Welfare Benefits

The named executive officers are offered the same retirement and welfare benefits as the rest of the Company’s full time employees. These benefits include medical and dental coverage, disability and life insurance and the Move, Inc. 401(k) Plan. The cost of these benefits is partially borne by the employee, including each named executive officer.

* Perquisites

The Company currently does not provide significant perquisites or personal benefits to the executive officers.

* Share Ownership Guidelines

We require our named executive officers to own specified amounts of the Company’s common stock. The number of shares of the Company’s common stock that must be held is set at a multiple of the executive’s base salary. The ownership requirement is based upon the executive’s position within the Company; for the CEO, the multiple is 5, and for the other named executive officers, the multiple is 3. The options and restricted stock held by each executive are considered in determining whether the executive maintains the appropriate stock holdings. With respect to restricted shares awarded after January 15, 2005, and with respect to shares acquired upon exercise of options awarded after January 15, 2005, 25% of the “profit shares” (i.e., those shares held after the payment of any applicable exercise price and taxes related to the vesting and/or exercise of the award) must be retained throughout the term of employment. In addition, 75% of the profit shares are required to be retained until persons hold sufficient shares to comply with the ownership targets. The covered executives have three years to comply with these requirements.

Regarding restricted stock and option exercises for grants issued prior to the above dates for each named executive officer, the executive is required to retain such amounts commensurate with their personal financial circumstances until such executive has sufficient retention to comply with ownership targets.

* Tax Deductibility of Compensation .

Section 162(m) of the Internal Revenue Code of 1986, as amended, disallows the deduction for certain compensation in excess of $1 million paid to certain executive officers of the Company, unless the compensation qualifies as “performance-based” as defined in the Code and applicable regulations. In order to maintain flexibility, the Committee reserves the discretion to determine whether to seek to comply with the requirements of 162(m) based on the goals and objectives established by the Committee. The Company believes that stock options granted and bonuses awarded in 2006 satisfy the requirements for “performance-based compensation,” but all other compensation of executives in 2006 was subject to the Section 162(m) limits on deductibility.

MANAGEMENT DISCUSSION FROM LATEST 10K

Overview

Our History

We were incorporated in 1993 under the name of InfoTouch Corporation with the objective of establishing an interactive network of real estate “kiosks” for consumers to search for homes. In 1996, we began to develop the technology to build and operate real estate related Internet sites. In 1996, we entered into a series of agreements with NAR and several investors and transferred technology and assets to a newly-formed subsidiary, which ultimately became RealSelect, Inc. RealSelect, Inc. in turn entered into a number of formation agreements with, and issued cash and common stock representing a 15% ownership interest in RealSelect, Inc. to, NAR in exchange for the rights to operate the REALTOR.com ® web site and pursue commercial opportunities relating to the listing of real estate on the Internet. That 15% ownership in RealSelect, Inc. was exchanged for stock in a new parent company, Homestore.com, Inc., in August 1999. Our initial operating activities primarily consisted of recruiting personnel, developing our web site content and raising our initial capital and we began actively marketing our advertising products and services to real estate professionals in January 1997. We changed our name to Homestore, Inc. in May 2002 and to Move, Inc. in June 2006.

Our Business

Move, Inc. and its subsidiaries (“Move”, “we”, “our” or “us”) operate the leading online network of web sites for real estate search, finance, moving and home enthusiasts and is the essential resource for consumers seeking the information and connections they need before, during and after a move. Our flagship consumer web sites are Move.com ® , REALTOR.com ® and Moving.com. We also provide lead management software for real estate agents and brokers through our Top Producer ® business and local merchant and community information to new movers through our Welcome Wagon ® business.

On our web sites we display comprehensive real estate property content, with over four million resale, new home and rental listings, as well as extensive move-related information and tools. We hold a significant leadership position in terms of web traffic, attracting an average of 8.5 million consumers to our network per month in 2007 according to comScore Media Metrix, a substantial lead over the number two real estate site. We also have strong relationships with the real estate industry, including content agreements with approximately 900 Multiple Listing Services (“MLS”) across the country and exclusive partnerships with the National Association of REALTORS ® (“NAR”) and the National Association of Home Builders (“NAHB”).

Our vision is to revolutionize the American dream of home ownership. A home is the single largest investment in most people’s lives, and we believe a tremendous opportunity exists to help transform the difficult process of finding a place to live into the emotional connection of home. Our mission is to be the most trusted source for real estate online.

Business Trends and Conditions

In recent years, our business has been, and we expect will continue to be, influenced by a number of macroeconomic, industry-wide and product-specific trends and conditions:


• Market and economic conditions. In recent years, the U.S. economy has experienced low interest rates, and volatility in the equities markets. Through 2005, housing starts remained strong, while the supply of apartment housing generally exceeded demand. For a number of years prior to 2007, owning a home became much more attainable for the average consumer due to the availability of flexible mortgage options, which required minimal down payments and provided low interest rates. During this period, home builders spent less on advertising, given the strong demand for new houses, and homeowners who were looking to sell a home only had to list it at a reasonable price in most areas of the U.S. to sell in 60 days or less. Conversely, demand for rental units declined and apartment owners did not spend as much money on advertising, as they have sought to achieve cost savings during the difficult market for rentals. These trends had an impact on our ability to grow our business.

Beginning in the second half of 2006, the market dynamics seemed to reverse. Interest rates rose and mortgage options began to decline. The housing market became saturated with new home inventory in many large metropolitan markets and the available inventory of resale homes began to climb as demand softened. The impact of the rise in interest rates caused demand for homes to decline into mid-2007. In the second half of 2007, the availability of mortgage financing became very sparse. The lack of liquidity coupled with increased supply of homes and declining prices had a significant impact on real estate professionals, our primary customers.

These changing conditions resulted in fewer home purchases and forced many real estate professionals to reconsider their marketing spend. In 2006, we saw many customers begin to shift their dollars from conventional offline channels, such as newspapers and real estate guides, to the Internet. We saw many brokers move their spending online and many home builders increased their marketing spend to move existing inventory, even as they slowed their production and our business grew as a result. However, as the slow market continued into 2007, it has caused our rate of growth to decline. While the advertising spend by many of the large agents and brokers appears steady, some of the medium and smaller businesses and agents have reduced expenses to remain in business and this could cause our growth rate to decline further and possibly experience a decline in revenue as we move into 2008.


• Evolution of Our Product and Service Offerings and Pricing Structures.

Real Estate Services segment: Our Real Estate Services began as a provider of Internet applications to real estate professionals. It became apparent that our customers valued the media exposure that the Internet offered them, but not all of the “technology” that we were offering. Many of our customers objected to our proposition that they purchase our templated web site in order to gain access to our networks. In addition, we were charging a fixed price to all customers regardless of the market they operated in or the size of their business. Our Top Producer ® product was a desktop application that required some knowledge of the operations of a desktop computer.

In 2003, we responded to our customers’ needs and revamped our service offerings. We began to price our REALTOR.com ® services based on the size of the market and the number of properties the customer displayed. For many of our customers this change led to substantial price increases over our former technology pricing. This change was reasonably well-accepted by our customers.

In 2006, we changed the business model for our New Homes and Rentals businesses. In the past, we have charged homebuilders and rental owners to list their properties on our HomeBuilder.com ® and RENTNET ® web sites. When we launched the Move.com tm web site on May 1, 2006, we replaced our new home site, HomeBuilder.com, and our apartment rental site, RENTNET, with Move.com. In conjunction with this change, we began to display any new home and apartment listing for no charge. We seek revenue from enhanced listings, including our Showcase Listing and Featured Listing products, as well as other forms of advertising on the sites. Featured Listings, which appear above the algorithmically-generated search results, are priced on a fixed “cost-per-click” basis. When we launched the Move.com tm web site, existing listing subscription customers were transitioned into our new products having comparable value for the duration of their existing subscription.

In today’s market, our customers are facing a decline in their business and have to balance their marketing needs with their ability to pay. As a result, they are demanding products that perform and provide measurable results for their marketing spend. We are evaluating customer feedback and balancing that with the need for an improved consumer experience and will modify our products and our pricing to be responsive to both.

Consumer Media segment: Continued uncertainty in the economy has had an adverse effect on our Welcome Wagon ® business. Our primary customers are small local merchants trying to reach new movers and economic conditions have negatively impacted small businesses more than other businesses. These economic conditions have caused the decline in our revenue in this segment to continue. We have seen some improvement in market conditions in some geographic areas in 2007, but it could take considerable time before this segment yields meaningful growth, if at all. Significant growth will require that we introduce new products that are responsive to advertisers’ demands and are presented to consumers much more timely.

Results of Operations

We have a limited operating history and our business model has been modified over the past three years. In addition, we have begun to implement changes in 2007 and we expect additional changes to our business model in 2008. Our prospects should be considered in light of the risks, uncertainties, expenses and difficulties frequently encountered by companies in their early stages of development, particularly companies in new and rapidly evolving markets such as the Internet. To address these risks, we must, among other things, be able to continue to:


• execute our business model, including changes to that model;

• respond to highly competitive developments;

• attract, retain and motivate qualified personnel;

• implement and successfully execute our marketing plans;

• continue to upgrade our technologies;

• develop new distribution channels; and

• improve our operational and financial systems.

For the Years Ended December 31, 2007 and 2006

Revenue

Revenue increased approximately $6.2 million, or 2%, to $286.3 million for the year ended December 31, 2007 from revenue of $280.1 million for the year ended December 31, 2006. The increase in revenue was due to increases of $12.2 million in the Real Estate Services segment partially offset by a decrease of $6.0 million in the Consumer Media segment. These changes by segment are explained in the segment information below.

Cost of Revenue

Cost of revenue decreased approximately $1.6 million, or 3%, to $57.2 million for the year ended December 31, 2007 from $58.8 million for the year ended December 31, 2006. The decrease was primarily due to decreases in material and shipping costs of $3.2 million, decreases in facilities costs of $1.3 million due to the relocation of the data center and other cost decreases of $0.2 million, partially offset by increases in hosting and web content costs of $1.9 million and increases in depreciation expense of $1.2 million due to the acquisition of new technology equipment for the data center.

Gross margin percentage increased to 80% for the year ended December 31, 2007 from 79% for the year ended December 31, 2006.

Operating Expenses

Sales and Marketing. Sales and marketing expenses remained relatively stable, and increased approximately $0.7 million, or 1%, to $108.6 million for the year ended December 31, 2007 from $107.9 million for the year ended December 31, 2006. The increase was primarily due to increases in online distribution costs.

Product and Web Site Development. Product and web site development expenses increased approximately $1.0 million, or 3%, to $34.7 million for the year ended December 31, 2007 from $33.7 million for the year ended December 31, 2006. The overall increase was primarily due to an increase of $2.5 million in consulting costs to improve our product offerings in our REALTOR.com ® and Top Producer ® businesses and other cost increases of $0.3 million, partially offset by a decrease in personnel related costs of $1.8 million.

General and Administrative. General and administrative expenses increased approximately $1.0 million, or 1%, to $80.7 million for the year ended December 31, 2007 from $79.7 million for the year ended December 31, 2006. The increase was primarily due to an increase of $3.8 million in personnel related costs, $1.2 million of which represented one-time severance costs for a key executive, an increase of $1.2 million in insurance costs as a result of a one-time refund received in the year ended December 31, 2006, a $0.8 million charge taken for lease termination costs, and other cost increases of $0.5 million. These increases were partially offset by a $4.4 million decrease in consulting costs, $3.2 million of which was due to the completion of the relocation of our data center in the year ended December 31, 2006, and a $0.9 million decrease in non-cash stock-based compensation due to the reversal of $4.0 million in previously recognized compensation expense associated with restricted stock unit grants, partially offset by additional expense due to one-time charges for stock options and restricted stock issued to a new executive officer that were immediately vested and new stock option grants.

Amortization of Intangible Assets. Amortization of intangible assets was $2.0 million for the years ended December 31, 2007 and 2006.

Restructuring Charges. There were no restructuring charges for the year ended December 31, 2007. We recorded a $0.3 million reduction to our restructuring charges for the year ended December 31, 2006 as a result of the early buy-out of the remaining lease obligation in Canada.

Impairment of long-lived assets. There was a $6.1 million impairment charge for the year ended December 31, 2007. The Company recorded an impairment charge of $5.5 million associated with certain software and capitalized web site development costs for the year ended December 31, 2007. In addition, due to the loss of a specific contract and the associated revenue streams, certain long-lived assets associated with the issuance of warrants were determined to be impaired. The Company recorded an additional impairment charge of $0.6 million for the year ended December 31, 2007 for this impairment.

Litigation Settlement. We recorded litigation settlement charges of $3.9 million for the year ended December 31, 2007. There were no litigation settlement charges for the year ended December 31, 2006. These settlements are discussed in Note 21, “Settlements of Disputes and Litigation” to our audited Consolidated Financial Statements contained in Item 8 of this Form 10-K.


Stock-based compensation and charges decreased for the year ended December 31, 2007 primarily due to the reversal of previously recognized expense for restricted stock units, partially offset by one-time charges for stock options and restricted stock issued to a new executive officer that were immediately vested and new stock option grants. As of December 31, 2007, there was $37.7 million of unrecognized compensation cost related to non-vested stock option awards granted under the Company’s plans. Substantially all of that cost is expected to be recognized over a weighted average period of 2.8 years.

Interest Income, Net

Interest income, net, increased $2.6 million to $9.9 million for the year ended December 31, 2007 compared to $7.3 million for the year ended December 31, 2006, primarily due to increases in short-term investment balances and higher interest rates on those balances.

Other Income, Net

Other income, net, decreased $15.9 million to $1.5 million for the year ended December 31, 2007 compared to $17.4 million for the year ended December 31, 2006, primarily due to a realized gain on sale of investments of $15.7 million for the year ended December 31, 2006 resulting from the sale of certain marketable securities that had previously been permanently impaired and written off during the year ended December 31, 2001.

Income Taxes

As a result of historical net operating losses, we have generally not recorded a provision for income taxes. However, during the year ended December 31, 2006, we recorded certain indefinite lived intangible assets as a result of the purchase of Moving.com which creates a permanent difference as the amortization can be recorded for tax purposes but not for book purposes. A tax provision in the amount of $167,000 and $134,000 was recorded during the years ended December 31, 2007 and 2006, respectively, as a result of this permanent difference which cannot be offset against net operating loss carryforwards due to its indefinite life. In addition, during the year ended December 31, 2007, a current tax provision of $334,000 was recorded due to federal alternative minimum taxes incurred as a result of the utilization of net operating losses against taxable income. At December 31, 2007, the Company had gross net operating loss carryforwards (“NOLs”) for federal and state income tax purposes of approximately $912.6 million and $402.4 million, respectively. The federal NOLs begin to expire in 2008. Approximately $21.1 million of the state NOLs expired in 2007, and the state NOLs will continue to expire in 2008. Gross net operating loss carry forwards for both federal and state tax purposes may be subject to an annual limitation under relevant tax laws. We have provided a full valuation allowance on our deferred tax assets, consisting primarily of net operating loss carryforwards, due to the likelihood that we may not generate sufficient taxable income during the carry-forward period to utilize the net operating loss carryforwards.

Segment Information

Segment information is presented in accordance with SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information.” This standard is based on a management approach, which requires segmentation based upon our internal organization and disclosure of revenue and operating expenses based upon internal accounting methods. During the fourth quarter of 2005, we revised our business segments to align with the way we are approaching the market: Real Estate Services for those products and services offered to real estate industry professionals trying to reach consumers and Consumer Media (formerly Move-Related Services) for those products and services offered to other advertisers who are trying to reach those consumers in the process of a move. As a result of these changes, we evaluate performance and allocate resources based on these two segments. We have reclassified previously reported segment data to conform to the current period presentation. This is consistent with the data that is made available to our management to assess performance and make decisions. In June 2007, the Company changed the name of its former Move-Related Services segment to Consumer Media.

The expenses presented below for each of the business segments include an allocation of certain corporate expenses that are identifiable and benefit those segments and are allocated for internal management reporting purposes. The unallocated expenses are those corporate overhead expenses that are not directly attributable to a segment and include: corporate expenses, such as finance, legal, internal business systems, and human resources; amortization of intangible assets; litigation settlement charges; impairment charges; stock-based charges; and acquisition and restructuring charges. There is no inter-segment revenue. Assets and liabilities are not fully allocated to segments for internal reporting purposes.

Real Estate Services

Real Estate Services consists of products and services that promote and connect real estate professionals to consumers through our REALTOR.com ® , New Homes and Rentals on Move.com tm and SeniorHousingNet tm .com web sites, in addition to our customer relationship management applications for REALTORS ® offered through our TOP PRODUCER ® business. During the second quarter of 2006, we launched Move.com as a real estate listing and move-related search site. Shortly after its launch, Move.com replaced HomeBuilder.com ® and RENTNET ® .com and we began promoting those under the Move ® brand. Our revenue is derived from a variety of advertising and software services, including enhanced listings, company and property display advertising, customer relationship management applications and web site sales which we sell to those businesses interested in reaching our targeted audience or those professionals interested in being more effective in managing their contact with consumers.

Real Estate Services revenue increased approximately $12.2 million, or 6%, to $220.5 million for the year ended December 31, 2007, compared to $208.3 million for the year ended December 31, 2006. The revenue increase was primarily generated by an increase in our REALTOR.com ® business driven by increased Company Showcase Listing Enhancement revenue and increased Featured Home revenue, partially offset by a decrease in Virtual Tour revenue. Additionally, there was an increase in our Top Producer business primarily due to continued growth in our 7i tm subscriber base and increased revenue from the Top Website tm and Top Marketer tm products which were launched during the year ended December 31, 2006. These increases were partially offset by a decrease in revenue from our Rentals business. Real Estate Services revenue represented approximately 77% of total revenue for the year ended December 31, 2007 compared to 74% of total revenue for the year ended December 31, 2006.

Real Estate Services expenses increased $2.2 million, or 1%, to $160.6 million for the year ended December 31, 2007 from $158.4 million for the year ended December 31, 2006. The increase was primarily due to a $1.9 million increase in product and development costs related to increased consulting and personnel costs, a $1.4 million increase in cost of sales related to increased hosting and web content costs and a $1.2 million increase in sales and marketing costs due to increased sales compensation from the increased revenues, partially offset by a $2.3 million decrease in general and administrative costs primarily due to decreased personnel related costs, including a $0.3 million decrease in non-cash stock-based compensation primarily due to a $1.3 million reversal of previously recognized expense associated with restricted stock units partially offset by additional stock option grants.

Real Estate Services generated operating income of $59.9 million for the year ended December 31, 2007 compared to $49.9 million for the year ended December 31, 2006 primarily due to the increased revenues discussed above. We will continue to seek increased revenue through new product offerings and new market opportunities.

Consumer Media

Consumer Media consists of advertising products and lead generation tools including display, text-link and rich advertising positions, directory products, price quote tools and content sponsorships on Move.com, Moving.com, and other related sites which we sell to those businesses interested in reaching our targeted audience. In addition, it includes our Welcome Wagon ® new-mover direct mail advertising products. We recently announced plans to divest our Homeplans business which, as a result, the operating results of this business have been reclassified as discontinued operations for all periods presented.

Consumer Media revenue decreased $6.0 million, or 8%, to $65.7 million for the year ended December 31, 2007, compared to $71.7 million for the year ended December 31, 2006. The decrease was primarily generated by a decline in our online advertising revenue, a decrease in the Welcome Wagon business primarily due to a general decline in the number of movers as well as the elimination of selected books in markets with low or negative profit margins, partially offset by an increase in revenues from the Moving.com business resulting from a full year of revenue as the business was purchased on February 21, 2006.

Consumer Media expenses decreased $3.0 million, or 4%, to $72.1 million for the year ended December 31, 2007 from $75.1 million for the year ended December 31, 2006. The decrease was primarily due to a $2.0 million decrease in shipping and material costs related to lower distribution in our Welcome Wagon business and a $1.2 million decrease in bad debt expense, partially offset by other costs increases of $0.2 million.

Consumer Media generated an operating loss of $6.4 million for the year ended December 31, 2007 compared to an operating loss of $3.3 million for the year ended December 31, 2006 primarily due to factors outlined above. We continue to seek increased revenue through new product offerings and new market opportunities.

Unallocated

Unallocated expenses increased $12.4 million, or 26%, to $60.6 million for the year ended December 31, 2007 from $48.2 million for the year ended December 31, 2006. The increase was primarily due to one-time costs associated with a $6.1 million impairment charge and a $3.9 million litigation settlement. The remaining increase was associated with an increase of $5.6 million in personnel related costs, $1.5 million of which represented one-time severance costs for key executives, an increase of $1.2 million in insurance costs as a result of a one-time refund received in the year ended December 31, 2006 and a $0.8 million charge taken for lease termination costs. These increases were partially offset by a $4.5 million decrease in consulting costs, $3.2 million of which was due to the completion of the relocation of our data center in the year ended December 31, 2006, a $0.5 million decrease in non-cash stock-based compensation due to the reversal of $2.5 million in previously recognized compensation expense associated with restricted stock unit grants, partially offset by additional expense due to one-time charges for stock options and restricted stock issued to a new executive officer that were immediately vested and new stock option grants, and other cost decreases of $0.2 million.

MANAGEMENT DISCUSSION FOR LATEST QUARTER

Results of Operations
Three Months Ended September 30, 2007 and 2006
Revenue
Revenue remained relatively stable at $75.6 million for the three months ended September 30, 2007 compared to $75.7 million for the three months ended September 30, 2006. An increase of $2.5 million in the Real Estate Services segment was offset by a decrease of $2.6 million in the Consumer Media segment. These changes are explained in the segment information below.
Cost of Revenue
Cost of revenue decreased approximately $1.0 million, or 6%, to $16.0 million for the three months ended September 30, 2007 from $17.0 million for the three months ended September 30, 2006. The decrease was primarily due to a reduction in material and shipping costs of $1.3 million primarily due to lower book distribution costs in our Welcome Wagon ® business and the elimination of magazines in our New Homes business and other cost reductions of $0.2 million. This decrease was partially offset by an increase of $0.5 million in hosting and imaging costs.
Gross profit percentage increased to 79% for the three months ended September 30, 2007 compared to 78% for the three months ended September 30, 2006. The increase is primarily due to an increase in margins in our Welcome Wagon ® business resulting from the elimination of selected books in markets with low or negative profit margins.
Operating Expenses
Sales and marketing. Sales and marketing expenses decreased approximately $0.5 million, or 2%, to $28.4 million for the three months ended September 30, 2007, from $28.9 million for the three months ended September 30, 2006. The decrease was primarily due to a decrease in online marketing costs.
Product and web site development. Product and web site development expenses remained relatively stable, increasing approximately $0.3 million, or 3%, to $8.7 million for the three months ended September 30, 2007, from $8.4 million for the three months ended September 30, 2006.
General and administrative. General and administrative expenses increased approximately $3.4 million, or 16%, to $24.4 million for the three months ended September 30, 2007, from $21.0 million for the three months ended September 30, 2006. The increase was primarily due to a $2.2 million increase in personnel related costs, $1.2 million of which represented one-time severance costs for a key executive, a $1.7 million increase in non-cash stock-based compensation due to additional stock option and restricted stock unit grants, a $0.7 million charge taken in the three months ended September 30, 2007 for lease termination costs, a $0.7 million in increase in consulting costs related to internal business system support, and other cost increases of $0.4 million. These increases were partially offset by a $1.0 million decrease in bad debt expense and a $1.3 million reduction in consulting expenses resulting from the completion of the relocation of our data center in fiscal 2006.
Amortization of intangible assets. Amortization of intangible assets was $0.5 million for the three months ended September 30, 2007 and 2006, respectively.
Litigation settlement. We recorded a litigation settlement charge of $3.9 million for the three months ended September 30, 2007. There was no litigation settlement charge in the three months ended September 30, 2006. The settlement is discussed in Note 11, “Settlement of Disputes and Litigation” to our Condensed Consolidated Financial Statements contained in Item 1 of this Form 10-Q.

Stock-based compensation and charges increased for the three months ended September 30, 2007 compared to the three months ended September 30, 2006 primarily due to additional stock option, restricted stock and restricted stock unit grants.
Interest Income, Net
Interest income, net, increased $0.7 million to $2.6 million for the three months ended September 30, 2007 compared to $1.9 million for the three months ended September 30, 2006, primarily due to increases in short-term investment balances and higher interest yields on those balances.
Other Income, Net
Other income, net, increased $0.6 million to $0.7 million for the three months ended September 30, 2007 compared to $0.1 million for the three months ended September 30, 2006, primarily due to $0.6 million in income recognized from the revaluation of an embedded derivative liability resulting from the sale of convertible preferred stock in December 2005.

Income Taxes
As a result of historical net operating losses, we have generally not recorded a provision for income taxes. A $169,000 tax provision was recorded for the three months ended September 30, 2007 due to federal alternative minimum taxes incurred as the result of the utilization of net operating losses against our taxable income for the period.
As of December 31, 2006, we had $942.0 million of net operating loss carryforwards for federal and foreign income tax purposes, which begin to expire in 2008. We have provided a full valuation allowance on our deferred tax assets, consisting primarily of net operating loss carryforwards, due to the likelihood that we may not generate sufficient taxable income during the carry-forward period to utilize the net operating loss carryforwards. A deferred tax liability has been established for the difference between tax amortization of certain indefinite lived intangible assets for financial statement purposes and for tax purposes.
Segment Information
Segment information is presented in accordance with SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information.” This standard is based on a management approach, which requires segmentation based upon the Company’s internal organization and disclosure of revenue and operating expenses based upon internal accounting methods. The Company’s management evaluates performance and allocates resources based on two segments consisting of Real Estate Services for those products and services offered to industry professionals trying to reach new movers and manage their relationships with them and Consumer Media for those products and services offered to other advertisers who are trying to reach those consumers in the process of a move. This is consistent with the data that is made available to our management to assess performance and make decisions. In June 2007, we changed the name of our former Move-Related Services segment to Consumer Media.
The expenses presented below for each of the business segments include an allocation of certain corporate expenses that are identifiable and benefit those segments and are allocated for internal management reporting purposes. The unallocated expenses are those corporate overhead expenses that are not directly attributable to a segment and include: corporate expenses, such as finance, legal, internal business systems, and human resources; amortization of intangible assets; and stock-based charges. There is no inter-segment revenue. Assets and liabilities are not fully allocated to segments for internal reporting purposes.

Real Estate Services consists of products and services that promote and connect real estate professionals to consumers through our REALTOR.com ® , New Homes and Rentals on Move.com and SeniorHousingNet.com web sites, in addition to our customer relationship management applications for REALTORS ® offered through our Top Producer ® business. During the second quarter of 2006, we launched Move.com as a real estate listing and move-related search site. Shortly after its launch, the Move.com replaced the HomeBuilder.com ® and Rentnet.com web sites and we began promoting those under the Move ® brand. Our revenue is derived from a variety of advertising and software services, including enhanced listings, company and property display advertising, customer relationship management applications and web site sales which we sell to those businesses interested in reaching our targeted audience or those professionals interested in being more effective in managing their contact with consumers.
Real Estate Services revenue increased $2.5 million, or 5%, to $55.9 million for the three months ended September 30, 2007, compared to $53.4 million for the three months ended September 30, 2006. The revenue increase was primarily generated by an increase in our REALTOR.com ® business driven by increased customer count and higher average spending per customer on our Enhanced Listing Product. Additionally, there was an increase in our Top Producer ® product offerings as we launched the Top Website product as well as continued growth in our subscriber base for our online software. These increases were partially offset by decreased revenue from our Rentals business. Real Estate Services revenue represented approximately 74% of total revenue for the three months ended September 30, 2007, compared to 71% of total revenue for the three months ended September 30, 2006.
Real Estate Services expenses increased $2.5 million, or 6%, to $41.8 million for the three months ended September 30, 2007, compared to $39.3 million for the three months ended September 30, 2006. The increase was primarily due to a $1.3 million increase in consulting costs resulting from increased product development efforts, increased non-cash stock-based compensation costs of $1.0 million and other cost increases of $0.2 million.
Real Estate Services generated operating income of $14.1 million for the three months ended September 30, 2007, and the three months ended September 30, 2006 due to factors outlined above. We will continue to pursue revenue growth through new product offerings and new market opportunities.
Consumer Media
Consumer Media, formerly Move-Related Services, consists of advertising products and lead generation tools including display, test-link and rich advertising positions, directory products, price quote tools and content sponsorships on Move.com, Moving.com, and other related sites which we sell to those businesses interested in reaching our targeted audience. In addition, it includes our Welcome Wagon ® new-mover direct mail advertising products and the sale of new home plans and related magazines through our Homeplans business.
Consumer Media revenue decreased $2.6 million, or 12%, to $19.7 million for the three months ended September 30, 2007, compared to $22.3 million for the three months ended September 30, 2006. The decrease was primarily generated by a decline in our online advertising revenue, a decrease in the Welcome Wagon ® business primarily due to lower book distribution due to the general decline in the number of movers as well as the elimination of selected books in markets with low or negative profit margins, and a decline in our Homeplans business revenues. Consumer Media revenue represented 26% of total revenue for the three months ended September 30, 2007 compared to 29% of total revenue for the three months ended September 30, 2006.
Consumer Media expenses decreased $2.7 million, or 12%, to $20.5 million for the three months ended September 30, 2007, compared to $23.2 million for the three months ended September 30, 2006. The decrease was primarily due a $1.2 million decrease in sales and marketing costs as a direct result of reduced revenues, a $1.0 million decrease in bad debt expense, and a $0.9 million decrease in material and shipping costs related to lower distribution in our Welcome Wagon ® business. There decreases were offset by various operating cost increases of $0.4 million.
Consumer Media generated an operating loss of $0.9 million for the three months ended September 30, 2007, and the three months ended September 30, 2006 primarily due to factors outlined above.
Unallocated
Unallocated expenses increased $6.6 million, or 51%, to $19.6 million for the three months ended September 30, 2007, compared to $13.0 million for the three months ended September 30, 2006. The increase was primarily due to a $3.9 million increase in litigation settlements, increases in personnel related costs of $2.1 million, $1.5 million of which represented one-time severance costs for key executives and a $0.7 million charge taken in the three months ended September 30, 2007 for lease termination costs, increased legal fees of $0.4 million and other costs increases of $0.8 million. These increases were partially offset by a decrease of $1.3 million in consulting costs primarily resulting from the completion of the relocation of our data center in fiscal 2006.

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