Blaming Timid Advertisers, CNet Slashes Guidance

Updated from 5:42 p.m. EDT:

Just a temporary malfunction, folks.

CNet Networks CNET reported results for the first quarter of 2001 at the lower end of lowered expectations, and again cut its financial guidance for the year. But despite the first-quarter revenue hit, CNet says it expects things to get slightly better all the time.

The technology news and information company reported an adjusted loss, excluding goodwill amortization and other charges, of 13 cents per share for the quarter, compared to the 10-cent loss forecast by analysts surveyed by Thomson Financial/First Call and a 2-cent profit a year earlier. CNet reported net revenue for the first quarter of $75.2 million, compared to net revenue of $92.8 million a year earlier.

Including a $113.2 million noncash investment writedown and other charges and expenses, the company reported a net loss of $316.6 million, or $2.33 per share, for the quarter ended March 31, compared to a $27.7 million loss, or 36 cents per share, in the first quarter of 2000.

CNet, which has already lowered expectations twice in the past few months, lowered them again for the coming year. The company says it's expecting revenue of $310 million to $328 million for 2001; going into the call, analysts had been expecting more than $370 million in revenue, compared to last year's $427.7 million.

Ahead of the call, the company's shares rose 45 cents to close at $12.72. Following the company's conference call with analysts, the stock fell to $10.75 in after-hours trading on Island.

The company, which had reported $120 million in revenue for the fourth quarter (pro forma for the company's acquisition of rival ZDNet last fall), blamed its first-quarter sales decline on a panicked reation by its tech-market advertisers. "We saw an overreaction in the first quarter, and we do think it's going to be very short-term," said a CNet executive on the conference call. Executives said the revenue decline was caused by marketers' choice to advertise in less-expensive spots on the site, not by CNet's cutting any ad rates.

The company is forecasting a revenue bounceback in the second half of the year, but insisted on the call that the growth would come from several different factors -- such as demand for new, costly advertising formats -- and wasn't a stretch.