CNET Slumps on Outlook, Job Cuts

CNET Networks, Inc. (Nasdaq: CNET) fell US$1.12 to $14.75 in early trading Wednesday after the online media company reported a fourth-quarter loss and lowered its outlook for the current year.

The company also said it will lay off 10 percent of its workers as a result of the slump in the technology sector.

ABN Amro reportedly downgraded CNET shares to hold from buy following the report, while W.R. Hambrecht was said to have lowered its rating to neutral from buy.

Results, adjusted to reflect CNET’s October acquisition of ZDNet, were reportedly in line with analyst expectations. Earnings before interest, taxes, depreciation and other items totaled $18.1 million, or 9 cents per share, compared with a loss of $23.6 million, or 21 cents, in the year-earlier quarter.

Pro forma revenue rose to $120.1 million from $92.1 million.

However, CNET posted a net loss of $424.4 million, or $3.16 per diluted share, compared with net income of $224.1 million, or $1.65. The results included a $384.2 million non-cash charge to write down the value of investments.

“We had an outstanding year topped by a solid fourth quarter,” CNET chairman and chief executive officer Shelby Bonnie said. “In the fourth quarter, we focused on integrating our businesses to leverage the power of our combined assets.”

Added Bonnie: “Because of the current slowdown affecting the economy and particularly the technology market, we have limited visibility and thus have lowered our 2001 revenue guidance by 17 to 20 percent.”

CNET said it now expects revenue for the first quarter to total $86 million to $92 million, with full-year revenue of $450 million to $480 million. Earnings before interest, taxes, depreciation and amortization will be between breakeven and $5 million in the first quarter, and $60 million to $80 million for the year.

The company also said it will “eliminate duplication in certain businesses and discontinue certain non-growth or unprofitable businesses,” reducing its global workforce by about 10 percent over the next few weeks.

“We feel these are the steps needed to focus the company squarely on our long-term goals,” said Bonnie. “Our reduced guidance does allow for continued year-over-year revenue growth and increased profitability over year 2000 results, so our overall outlook is still very positive.”