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InfoSpace, the dot-com survivor that has pivoted multiple times throughout its 16-year history, is embarking on yet another voyage. The Bellevue company today announced the acquisition of TaxACT, the number two player in online tax preparation software. InfoSpace is paying $287.5 million for TaxACT, with plans to keep the company as a subsidiary operating out of its Cedar Rapids, Iowa home.

An acquisition by InfoSpace should not come as a surprise. During the company’s third quarter earnings release, InfoSpace CEO Bill Ruckelshaus indicated that the company was eyeing potential acquisition opportunities. At the time, it was sitting on a whopping $279 million in cash and cash equivalents, money the company said it had every intention to deploy.

However, the move into tax preparation software — a market long dominated by Intuit’s TurboTax software — is an interesting one given InfoSpace’s historical focus on search through properties such as Dogpile and Metacrawler.

Ruckelshaus explained the acquisition in today’s press release:

“As a leading brand with a loyal, growing customer base and a sustained track record, TaxACT is well positioned to grow in the large and enduring tax preparation category. As the market continues its shift toward online ‘do-it-yourself’ tax preparation, we are confident that we can leverage our online expertise, TaxACT’s industry leading solutions, and the fantastic TaxACT management team to drive future growth. The financial benefits of this transaction are compelling and provide us ongoing flexibility to invest in our businesses to further enhance shareholder value.”

TaxACT is a large company, with 70 employees and revenue of $78.1 million for the 12 months ended on September 30. It offers a free federal tax filing service, with other advanced offerings selling for $9.95 and $17.95. Backed by TA Associates, the company said that it handled more than five million tax filings last tax season, with most of those filed online.

Wall Street seems to like the news, sending shares of InfoSpace up nearly five percent to $11.57 in early morning trading.

Founded in 1996 by Naveen Jain, InfoSpace was one of the Seattle region’s dot-com superstars. But the company hit tough times during the dot-com bust, and later sold off many of its assets. Those included mobile assets that were sold to Motricity, and its yellow and white page directory business which was sold to Idearc.

The company has experimented in other categories, namely online retail. But that push didn’t pay off, and InfoSpace last summer sold off the Mercantila e-commerce unit at a loss.

Can InfoSpace now transition into the online tax preparation market?

FOLLOW-UP: Q&A with Bill Ruckelshaus: Here’s why InfoSpace just paid $287 million to compete with TurboTax


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