UPDATE 3-Idearc Q1 profit increases, shares rise

(Adds conference call details, background, updates share movement)

By Savio D'Souza

BANAGALORE, May 6 (Reuters) - Yellow pages directories publisher Idearc Inc (IAR.N: Quote, Profile, Research) posted a better-than-expected quarterly profit, helped by a rise in Internet revenue and lower operating costs, sending its shares up as much as 37 percent.

The publisher of Verizon Yellow Pages directories and Superpages.com is moving to a multi-product revenue mix and increasing its Internet-based products to balance its mature print directories business.

"We do expect the Internet revenue to ramp as we move through the year," the company said in a conference call with analysts, pegging the growth at about 20 percent for the year.

Idearc, which was spun off from Verizon (VZ.N: Quote, Profile, Research) in 2006, again spelled out its warning that the shift to a multi-product revenue mix would hurt operating margins.

Shares of Dallas, Texas-based Idearc rose to $4.55, before paring some gains to trade at $4.45, Tuesday afternoon on the New York Stock Exchange. Shares of its U.S.-based rival R.H. Donnelley Corp (RHD.N: Quote, Profile, Research) were trading up 25 percent at $6.09.

Idearc's shares have fallen 81 percent so far this year, before Tuesday's gains, as investors were concerned about the resilience of a business model based on printed directories amid the surge in online-related search.

Idearc's slump in fortunes mirrors those of its peers like R.H. Donnelley, British-based Yell Group (YELL.L: Quote, Profile, Research) and Italian Seat Pagine Gialle SpA (PGIT.MI: Quote, Profile, Research).