CBS is acquiring a big online reach with its acquisition of CNet Networks but also a company that's faced heavy criticism from investors...
NEW YORK — CBS is acquiring a big online reach with its acquisition of CNet Networks but also a company that’s faced heavy criticism from investors. Those concerns as well as the hefty $1.8 billion price tag helped send CBS’s shares down after the deal was announced Thursday.
Like other media companies, CBS has been working quickly to expand its online audience as more viewers and advertisers go there. Speaking on a conference call with reporters Thursday, CBS Chief Executive Leslie Moonves said CNet’s 54 million unique users per month would put CBS into the top 10 online-audience companies in the U.S.
CNet was an early player in the dot-com boom and survived the subsequent crash with a steady focus on technology news, reviews and entertainment with sites that include ZDNet, GameSpot.com and mp3.com. It also owns the highly valuable Internet domains names TV.com, Radio.com and News.com — names that would have clear associations with CBS’s television, radio and news businesses.
But its stock, which once traded as high as $79 during the bubble, has slumped over the last two years, leading to an investor rebellion that was gathering steam just as the CBS deal was announced.
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The $11.50 per-share price CBS is paying represents a huge premium of 45 percent over CNet’s stock price the day before.
Moonves predicted that the combined online revenues of CNet and CBS’s own online properties would reach $1 billion by 2010 or 2011. Last year CNet alone posted revenue of just over $400 million.
CNet investors cheered the deal, sending the company’s shares up $3.46, or 43.5 percent, to close at $11.41. CBS shareholders were less optimistic, and pushed that company’s shares down 59 cents, or 2.4 percent, to $24.23. Citigroup analyst Jason Bazinet said in a note that the “pricing risk is high” for CBS.