The Train Wreck At CNET (CNET) Gets Worse

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Stifel Nicolaus downgraded CNET (CNET), the big online tech website business. It dropped the shares 7% to $8.27. The stock had risen recently on rumors of a buy-out by its former CEO.

CNET now trades at a modest 3.4x revenue. TheStreet.com (TSCM), the financial content site, trades at 7x.

Wall St. would think the shares would be headed up. An options probe of the company ended recently.

But, the company’s financial results have been poor, especially given the large number of unique visitors to it network of websites. CNET Networks’ global network of Internet properties reached an average of 137 million unique monthly users during the second quarter of 2007, an increase of 18 percent from the second quarter of 2006

Total revenues for the June quarter were $97.2 million, a 5 percent increase compared to revenues of $92.4 million for the same period of 2006. Not impressive at all for a company largest supported by internet advertising. Net cash provided by operating activities for the second quarter of 2007 was $17.5 million, up from $14.9 million for the second quarter of 2006. An equally weak number.

So, CNET’s audience is growing faster than its revenue, a sign that advertisers don’t have much faith in the company’s content.

Are sites like TechCrunch and GigaOm offering content that is considered more important to tech readers? Could be.

Douglas A. McIntyre