CNet Drops on Shortfall

The company is analyzing the adequacy of its internal controls.
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(CNET) - Get Report

slipped 9% late Wednesday after guiding investors to expect a first-quarter loss and detailing a possible bookkeeping issue.

For its fourth quarter ended Dec. 31, the San Francisco-based tech Web site operator earned $9.2 million, or 6 cents a share, up from the year-ago $6.9 million, or a nickel a share. Excluding certain costs, latest-quarter earnings were 9 cents a share, a penny ahead of the Wall Street consensus estimate.

Revenue rose 21% from a year ago to $89 million, in line with the Thomson First Call estimate, and interactive revenue jumped 29% to $80 million.

"We delivered on our growth objectives in 2004, culminating in 30 percent Interactive revenue growth and expanding profit margins," said CEO Shelby Bonnie. "During the year, in addition to this strong financial performance, we achieved significant growth in user and usage trends. Key contributors include our success in increasing the visibility of our brands, and in deepening our established Website offerings with more engaging and innovative features such as video content, personalization, and community."

But the company guided toward a weak first quarter, saying it expects an operating loss of less than $2.6 million on revenue of around $73 million. Analysts had expected a penny-a-share profit on revenue of $77 million.

CNet said the fourth quarter included the impact of an $8.9 million noncash asset impairment charge associated with its acquisition of

Computer Shopper

magazine. The company said it took the charge as a result of an evaluation of the carrying value of that business.

CNet said it initially assessed the charge differently due to an error detected by its auditors at KPMG before fourth-quarter numbers were finalized. The company is now analyzing whether that error constitutes a weakness in its internal controls under Sarbanes-Oxley and will finalize that analysis before it's due to file its annual report March 16.

Late Wednesday, CNet fell 95 cents to $10.