CBS Makes Web Splash With C/Net

Pays hefty $1.8 billion for Internet giant, but some analysts are skeptical
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CBS, a relative laggard in the Internet space, made a big play with last week's $1.8 billion deal to buy technology-focused Web operator C/Net, but it left some analysts skeptical.

Merrill Lynch estimated C/Net could immediately improve CBS earnings, assuming back-office consolidations. Others were more cautious, noting it's a big price tag for a struggling Web media company, although there's plenty of room for easy improvement under CBS ownership that would make the deal pay off.

The properties that CBS will acquire—C/Net, ZDNet, GameSpot, TV.com, MP3.com, UrbanBaby and C/Net News.com —will provide more circulation for CBS content and Web ads for CBS to sell.

With the acquisition, CBS says it will become one the 10 most popular Internet companies in the U.S., with a combined 54 million unique users per month and approximately 200 million users worldwide. But CBS is paying a sizable 45% premium in its $11.50 a share buyout offer.

“Together, CBS and C/Net Networks will have significant additional exposure to the fastest-growing advertising sector and can accelerate our growth through a number of new content, promotion and advertising initiatives,” CBS president and CEO Leslie Moonves said in a statement.

Based in San Francisco, C/Net will join other CBS digital-media businesses that include CBS.com, Sportsline.com, MaxPreps.com, CBSNews.com, Last.fm, Wallstrip.com and MobLogic.tv.

CBS signaled its desire to get serious in new media by naming a onetime deal-making investment banker, Quincy Smith, as president of CBS Interactive. CBS says it doesn't plan another big acquisition soon. That would seem to rule out buying The Weather Channel basic network, which is for sale and has been valued at up to $5 billion, based in part on the popularity of its Website.

“The strategic rationale for the [C/Net] acquisition is pretty straightforward, as it allows CBS to add scale to its interactive business,” investment house Merrill Lynch said in a note to investors. “As of April, C/Net had more than 32 million unique monthly users in the United States, generating 437 million page views. Prior to the transaction, ComScore reported CBS as having 25 million monthly unique visitors generating 711 million page views.”

Publicly traded C/Net—which is a medium-sized Web content outfit—is a rare Web player with a weak stock price. Recently, it has battled investor Jana Partners, which owns 10% of C/Net, over the direction of the company. Some critics of the deal say C/Net hasn't kept pace with changes in the Internet space and note that with 1,000 employees, it may be overstaffed.

CBS is also a seller of assets by joining partners in the sale of indie film network The Sundance Channel earlier this month.

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