fyi - piper jaffrey research

KEY POINTS:

* Lower Operating Expenses Drive EPS, Revenue In Line. LOOK reported second
quarter revenue of $19.1M " slightly below our $19.5M estimate and within
company guidance of $18-20M. Excluding $1.7M from MSN, revenues for LOOK's
core business would have been $17.4M, a 7% sequential increase compared to
Q1. GAAP EPS from continuing operations of ($0.02) exceeded our ($0.05)
estimate, primarily due to lower than expected operating expenses which
declined 24% sequentially and were $1.9M below our estimate. GAAP EPS
including discontinued operations was ($0.01).

* Expenses Under Control, Profitability Now Dependant on Revenue Growth. While
LOOK's revenue growth has been solid, we are not entirely convinced that the
sources of current search volume (LOOK's new distribution partners) are
necessarily on stable ground. While the cost rationalization drove the
upside in Q2, the company noted that the expense base should stabilize at
current levels and hence to reach profitability the company will have to
drive significant revenue growth. The company outlined a three tier strategy
to accelerate revenue growth, including 1) drive increased proprietary
traffic through areas such as desktop applications (i.e. Net Nanny) 2) grow
the distribution base and 3) increase customer acquisition and yield
improvements. At a minimum, the company's cost structure requires $20+
million in revenues just for break even. While the company appears to be on
track to reach profitability by the second half of 2005, we likely will not
see any meaningful profits until 2006 at the earliest.

* Estimate Revisions. We are slightly increasing our EPS estimates to reflect
the lower than expected operating expenses. See following page for detailed
changes.
* Stock Action. We are maintaining our price target of $1.60, based on 1.5x
2005 revenues plus year-end 2004 net cash. While LOOK's fundamentals
continue to improve and the cost structure should enable the company to near
profitability by 2H05, we are not yet fully convinced that the long-growth
is sustainable and we continue to see limited upside at current levels.