UPDATE 3-IAC results beat expectations but shares slump

* Q3 adjusted EPS 71 cents vs Wall St view 66 cents

* Revenue up 38 percent, beats analysts' forecast

* Shares were halted and some trades canceled

* IAC said FactSet misinterpreted regulatory filing

* FactSet issued a correction

Oct 24 (Reuters) - IAC/InteractiveCorp easily beat quarterly expectations on the strength of its search business but its shares slumped, which the company said was due to a misinterpretation of its forecast by FactSet Research Systems . A research analyst noted though that investors could be disappointed in the outlook, which depicted decelerating search revenue growth. IAC executives said during an earnings call that they are expecting modest sequential search revenue growth in the fourth quarter versus the third quarter, which was up 43 percent. ``Maybe they were hoping for a little bit more,'' said James Dobson, an analyst with Benchmark Co. Still, for the third quarter, Barry Diller's IAC, a holding company for search, dating and media websites, said on Wednesday that revenue increased 38 percent in the third quarter to $714.5 million. Analysts had expected revenue of $692.8 million, according to Thomson Reuters I/B/E/S. Adjusted for tax benefits and one-time items, IAC reported earnings per share of 71 cents, beating analysts' forecast of 66 cents. However, shares of the company were whipsawed - rising as much as 3 percent then falling as much as 14 percent - resulting in a halt in trading. Nasdaq canceled trades in IAC that were made while trading was halted. During a conference call with analysts, IAC executives attributed the drop to an error in FactSet's interpretation of the forecast in IAC's 8-K regulatory filing. ``FactSet recognized an error and promptly issued a correction,'' said a FactSet spokesman. FactSet is a financial information company that provides market data and is a competitor to Thomson Reuters . IAC shares closed down 8.4 percent at $48.00 on Wednesday. Analysts commended IAC, which houses a host of internet properties including Ask.com and Match.com. ``Search overall was very good,'' said Sean Kim, an analyst with RBC Capital Markets. ``A lot of the beat was largely driven While not included in third-quarter results, IAC bought the About Group, a website that publishes specialty articles on topics ranging from personal finance to pets, from the New York Times Co for $300 million in September. At its media properties, IAC's operating loss widened to $13.2 million, from $2.8 million during the same period a year ago, mainly because of weakness at Newsweek Daily Beast. IAC released an 8-K filing on Wednesday that estimated an operating loss at its ``media and other segments'' that include Vimeo, College Humor, Newsweek Daily Beast and Hatch Labs, in the range of $28.2 million to $33.2 million in 2013. ``It's not as if we are taking the money and dropping the money into the ocean and see it sink,'' said Chairman and Senior Executive Barry Diller on the call, referring to IAC investing in its media properties. IAC said last week it would cease the print version of Newsweek at the end of the year and go all digital.

``We know the results of that will dramatically decrease losses in the future,'' Diller said. But while IAC has ``real enthusiasm'' for the digital edition of Newsweek, Diller said they are realistic. ``We have no stars in any of our eyes. Our plans for next year or any year forward are not going to relate in any material way from the results of Newsweek.'' IAC's net income fell to $40.7 million, or 43 cents per share, from $65 million, or 69 cents per share, in the same quarter last year. The company was helped last year by tax benefits associated with its investment in European dating site Meetic.