Updated from July 14 CNet Networks ( CNET) posted solid second-quarter numbers Wednesday and agreed to buy a Web photo site. Shares in the company rose 4 cents early Thursday to $9.54. The San Francisco-based interactive content company said it would pay up to $70 million in cash and deferred compensation for closely held Twofold Photos and its Webshots Web site. The deal, which is expected to close in the third quarter, should boost CNet's cash from operations this year and its earnings next year, the company said. CNet said Webshots, launched in 1996, "has amassed by far the largest publicly available collection of photo content, with 58 million images and more than 300,000 new photos uploaded daily." The acquisition reflects CNet's efforts to be more than a technology news and information site. After acquiring the MP3.com domain name last December, CNet relaunched the site this year as a "digital music discover and content resource," featuring free, legal song samples. The company also operates a music download service via its Download.com site. "As we focus on long-term, sustainable growth, we will continue to seek opportunities to expand our audience and customer segments in order to extend our leadership position in the interactive content category," said CEO Shelby Bonnie. CNet also posted a second-quarter loss of $1.5 million, or 1 cent a share. That's narrower than the year-ago loss of $11.6 million, or 8 cents a share. The latest quarter included $4.3 million of realignment costs, CNet said. Revenue rose 17% from a year ago to $68 million. The numbers were in line with the Wall Street analyst estimate quoted by Thomson First Call, which called for a penny-a-share loss on sales of $67.6 million. "The second quarter was another solid and consistent step forward along our growth trajectory, with healthy traction across our key metrics," Bonnie said. "Recent product developments, partnerships, and acquisitions demonstrate our progress toward reaching new audience and customer segments, as well as enhancing our depth, with innovative community and streaming video features that draw users further into the site experience."
CNet also boosted third-quarter and 2004 guidance, citing contributions from the Webshots business for the year's gains. For the third quarter, CNet guided to revenue of $69 million, a shade above the $67.5 million estimate. The company forecast 2004 revenue of $288.5 million, which is above the $284 million consensus. CNet said it expects that Webshots will contribute some $3.5 million in revenue and $1.85 million in operating income before depreciation and amortization in the fourth quarter. As a stand-alone entity, Webshots is expected to generate revenues of $12 million to $13 million and operating income before depreciation and amortization between $6.75 million and $7.25 million for the year ending Dec. 31, 2004. For the year ending Dec. 31, 2005, management expects Webshots total revenues to grow between 30%-35% from the prior year.