Investors Feeling Pain of Homestore's Stalled Turnaround

In the meantime, the company is still struggling to bring all of its business segments into the black. The company's software business, for instance, saw sales fall 3% in the most recent quarter from the same period a year ago. While its bottom line improved from an operating loss of $1.8 million, the software business was still in the red, posting a $189,000 operating loss.

And while Homestore lost its prime national competitor after reaching a marketing deal with Microsoft's (MSFT) MSN last year, the company still faces competition for home buyers' attention and agent listings from local real estate associations. The company depends on those associations for its own real estate listings, but real estate agents often point clients to their own local listings.

The company still should be able to attract real estate agents by allowing them to customize listings and brand themselves, things they can't often do on their local sites, said Mahaney. But, he added, the local sites remain a threat to the company.

"[They] are one of the biggest risks to Homestore's market opportunity," he said.

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