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Why CBS Bought CNET, And Not The Other Way Around

• 1999: CNET is a $12 billion company
• January 2000: CNET Aquires MySimon for $700 million
• October 2000: CNET Acquires Ziff Davis (ZDNet) for $1.6 billion (after the March 2000 stock crash)
• July 2004: CNET Acquires Webshots for $70 million
• October 2004: CNET Sells Webshots for $40 million
• May 2008: CBS Acquires CNET For $1.8 billion

CNET announced its sale to CBS, a $16.5 billion company, today for $1.8 billion. In late 1999, though, CNET was a $12 billion company. They subsequently acquired MySimon for $700 million and ZDNet for $1.6 billion, and it’s been all downhill for CNET’s market cap since then.

So why didn’t CNET continue to grow and ultimately take over a media dinosaur like CBS, instead of the other way around? Perhaps it was because they did deals like buying Webshots for $70 million and then a couple of years later selling Webshots for $40 million. Or perhaps it was because they failed to realize the importance of blogs until 2007. Whatever the cause, or causes, CNET failed to disrupt the old guard, and will find itself to be a footnote in Internet history rather than the headline it should have been.

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CNET CEO: “This Is An Exciting Day For Us”

CNET CEO Neil Ashe, who has been accused of “presiding over massive value destruction” will go down in history as the guy that was forced to sell CNET out to an old media dinosaur. But at least he’s given CNET’s stockholders back all of the losses they’ve sustained under his watch with the $1.8 billion sale to CBS. Ashe’s email to CNET staff this morning is below.

Hello Everyone,

This is an exciting day for us. Today, CBS and CNET Networks announced a definitive agreement under which CBS will acquire CNET Networks. This announcement represents an important strategic step for both of our companies. We expect to complete this transaction by early Q3 of this year.

You can read the full release formally announcing this acquisition here.

Together CBS and CNET Networks represent an unbeatable combination of premium content online, premium content on air and premium audiences. As a leading online media network, we will have an impressive portfolio of leading brands, including CNET, CBS.com, CBSSports.com (formerly Sportsline.com), GameSpot, BNET, and TV.com to name a few. Together we will be bigger, bolder and better than we could be apart.

Both CBS and CNET Networks share a common vision about interactive media, the importance of category defining brands and how to build online destinations that give people more of what they crave. CNET Networks brings unique skills and assets to CBS including our ability to build, operate and grow interactive brands, our flexible technology platforms as well as some of the most talented interactive media professionals in the industry today.

There will be significant promotion opportunities for our brands online across CBS’s Interactive portfolio, as well as offline across CBS’s leading media properties.

CBS’s brands complement our existing categories, giving us quality reach across premium audiences. On the sales side, we now have the ability to offer advertisers a larger audience, more brands, and more page views – providing marketers more scale. For example, we can now build the ultimate men’s network with sites like CNET, CBS Sports, GameSpot and BNET.

On Tuesday, May 20th, I will host a Company All Meeting in San Francisco. We’ll talk about the transaction and the exciting opportunities that it creates for both NCAA and CNET Networks and we’ll answer your questions. Stay tuned for details and logistics on that meeting.

So what now? We must remain focused on our day-to-day responsibilities. We still need to deliver on the commitments and promises we made to our users, our advertisers, our shareholders and our fellow employees.

In the weeks ahead, as we work to ensure the smooth integration of our two companies, we will continue to provide you with regular updates. If you have specific questions, please feel free to submit them through offline. We will aggregate your questions and incorporate answers into our communications.

Finally, I want to thank you for your continued hard work and support. It is because of you that 160 million people show up each month to interact with some of the best websites in the world. It is because of you that we have been recognized as a leading company with a unique culture and exceptional employees. It is your dedication to our users, our brands and each other that have enabled us to take this exciting step.

Today, the next chapter in our story begins.

Best, NA

*****************
Neil Ashe
CNET Networks, Inc.

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Jana Consortium: CNET leadership has “presided over massive value destruction”

The battle over the future of CNET continues. This morning the Jana consortium, which announced an attempt to take control of the CNET board of directors in January, published a website and white paper (embedded below) to support their effort.

Jana and its co-investors now own 14.9% of CNET, plus another 8% in non-voting derivatives. Their primary goal is to get voting control of the board to push through a broad agenda to reform the ailing company. But that hasn’t gotten them much face time with CEO Neil Ashe and the rest of the executive team. From reports, CNET has treated Jana as an outsider, despite the fact that they are the largest or second largest shareholder in the company. CNET sued to throw out Jana’s claims for board seats based on a technicality. That suit was dismissed quickly, but an appeal was filed last week.

At this point, the CNET team is trying to firm up the financial status of the company in advance of their annual shareholder meeting in June to have any chance of staying in control (and keeping their jobs). Jana, meanwhile, will be attempting to win points with the other stockholders to get their votes for the board slate they are proposing at that meeting.

The CNET board currently consists of eight directors. Two are up for election at the upcoming meeting (Peter Currie, Elizabeth Nelson). Jana wants to replace those two directors, and add five new seats, giving they 7 of 14 directors and voting control of the board.

The message Jana is sending to the CNET stockholders is straightforward and blunt:

Despite premiere brands and content, CNET Networks Inc. (”CNET”) has consistently underperformed peers and destroyed enormous shareholder value. We believe there is still time to reverse course and unlock value, but in order to do so CNET must undertake transformative change to strengthen its core assets and move from its “Web 1.0″ roots to the modern Internet industry. We believe CNET’s current leadership has failed to offer shareholders any evidence that it possesses either the necessary sense of urgency or the experience and expertise needed to lead this change successfully.

and

Despite owning leading web properties, over the past few years CNET has consistently underperformed its peers due to a failed strategy and an inability to proactively seize upon new opportunities and challenges in an effective manner. The majority of the current Board has overseen a 45% decline in shareholder value since 2005.

The white paper is an even broader condemnation of the management team. It begins with “The leadership of CNET…has presided over massive value destruction…CNET’s current leadership now claims it can reverse course and begin creating shareholder value, but we believe they have offered no evidence that they can do so.” They also point to data showing a three year, 25% decline in CNET stock v. a 40% gain in the Morgan Stanley Internet Index.

Jana’s plan: Bring in “new leadership” to CNET to execute on a new strategy focused on “strengthening core assets.” The plan is centered on improving advertising technology and organization, improving navigation and SEO strategies, and leveraging social media to boost growth. They also call for an improved content management system and significant cost reductions. Revenue per employee in 2007, they say, was dead last compared to CNET’s peers.

Starting on page 31 of the document below Jana also provides a timeline of events showing an increasingly hostile relationship between the parties.

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CNET Cuts 10% Of Workforce, Effective Immediately

CNET has announced that it will cut 10% of its workforce, or 120 people, effective immediately, in a move said to help it “focus on long-term growth amid complaints from some investors.”

CNET has had no shortage of headlines recently, from changes at the top through to an ongoing battle for control against largest shareholder Jana Partners.

According to an internal memo from CEO Neil Ashe, the restructure will include stronger emphasis on centralized services in areas like IT architecture, SEO, yield monetization, Facilities, Legal, HR and Communications.

Business Unit Realignment: with the introduction of an open API, “CNET will move its services, catalog, content management system onto one platform, making content development, syndication and content import easier and more open.” CNET has realigned its investments in TechRepublic and ZDNET “to improve monetization,” although exactly how and in what form was not specified. TV.com will be abandoning its emphasis on video for more (we presume low cost) content such as “entertainment features, breaking news, trivia competition, and polls.”

International: CNET is considering raising local capital to expand in China, but the rest of the international business operations appear to be subject to a review with an announcement in weeks, by that we presume that CNET may be closing some international sites.

Restructure costs: $3.5 million and $4 million to be accounted for in Q1, 2008.

More when we have it. Staff being terminated were to be informed at 2pm PST.

Update: Programmer Robert Balousek is one of the first reported casualties.

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CNET Cuts 10% Of Workforce, Effective Immediately (Updated With Internal Memo)

CNET has announced that it will cut 10% of its workforce, or 120 people, effective immediately, in a move said to help it “focus on long-term growth amid complaints from some investors.”

CNET has had no shortage of headlines recently, from changes at the top through to an ongoing battle for control against largest shareholder Jana Partners.

According to an internal memo from CEO Neil Ashe, the restructure will include stronger emphasis on centralized services in areas like IT architecture, SEO, yield monetization, Facilities, Legal, HR and Communications.

Business Unit Realignment: with the introduction of an open API, “CNET will move its services, catalog, content management system onto one platform, making content development, syndication and content import easier and more open.” CNET has realigned its investments in TechRepublic and ZDNET “to improve monetization,” although exactly how and in what form was not specified. TV.com will be abandoning its emphasis on video for more (we presume low cost) content such as “entertainment features, breaking news, trivia competition, and polls.”

International: CNET is considering raising local capital to expand in China, but the rest of the international business operations appear to be subject to a review with an announcement in weeks, by that we presume that CNET may be closing some international sites.

Restructure costs: $3.5 million and $4 million to be accounted for in Q1, 2008.

More when we have it. Staff being terminated were to be informed at 2pm PST.

Update: Programmer Robert Balousek is one of the first reported casualties.

Update: Here’s the full text of the internal memo from Ashe:

Hello Everyone,

We all recognize that we must continuously change to be successful, and we embrace change. At the beginning of the year, we talked about our focus on category defining brands and the need to drive greater efficiencies in the business. As part of that process, in late January, I asked Zander to lead a task force to evaluate our current organization and resource alignment.

The task force evaluated the following areas of our business: organizational construct, technology infrastructure, editorial development and go-to-market strategies. Our focus was on creating a leaner centralized organization that provides expertise and best practices around areas of excellence, efficiency, and governance such as IT architecture, SEO, yield monetization, facilities, legal, HR and communications; evolving our editorial teams so everyone is focused on content creation; innovating our technology infrastructure to embrace open APIs and drive more efficiencies throughout the organization; and finally, simplifying our sales approach by building on the traction of our partner account strategy.

Based on that business analysis, today, we are making significant changes to the organization. This includes the very difficult decision to make a workforce reduction that will affect 10 percent of our U.S. workforce or about 120 people. These changes allow the company to put greater focus on its leading brands, as well as help drive efficiencies throughout the business.

CNET Networks is made up of great employees who have all contributed to the success of the company. While the changes we are making are part of our long-term growth strategy, I understand that it doesn’t make it any easier to see our friends and colleagues leave us.

Today, employees have been meeting with their managers to hear more specifics on how these changes impact their individual roles. Anyone who is impacted will be informed by 2 p.m. Pacific Time. Resources will be in place to help all employees manage through this transition, including outplacement assistance services and support from employees’ managers and HR.

Let me provide you with an overview of the changes we are making.

Refocusing Central Services are realigning our centralized services. We will look to central groups to provide expertise and best practices around areas of excellence, efficiency, and governance. This includes areas like IT architecture, SEO, yield monetization, Facilities, Legal, HR and Communications.

Operations

Operations is a newly formed organization led by Sam Parker that covers the full breadth of our shared IT and product services. This group integrates our enterprise business systems and network groups into one team.

As part of this change, I’m pleased to announce that Ned Rhinelander is taking on the new role of VP of IT Architecture. In this new role, Ned will track technology choices and adoption across the company, identify opportunities for efficiencies and innovations, and work closely with business unit engineering leaders to set shared standards and directions. Sam and his team will work to continue to find ways to drive efficiencies, ensuring we get the full benefit from our scale, and our brands have an advantage in the markets in which they compete.

Sales

Dave Morris will take on the role of Chief Client Officer reporting directly to me and joining the executive committee. In this role, Dave will drive our revenue strategy including our management of partner accounts, network-wide advertising programs, and the Detroit auto market. Dave will also oversee a go-to-market sales strategy that supports the company’s revenue plan, as well as business operations and network product marketing.

We are making these changes to simplify our sales organization and to build on the early traction of our partner account strategy. The existing corporate accounts will become part of the partner accounts program. The partner accounts program allows the company to have an integrated sales approach that benefits from the expertise and talent we have throughout the organization, while at the same time allowing key marketing partners to realize the power of all of our leading brands.

Dave will be the Chairman of the Revenue Council and have the authority to create and drive company-wide revenue initiatives. Dave will also have a small team that will leverage the BU marketing organizations to support the company’s network initiatives. Finally, Jack Haire will be returning to his Special Advisor role and will continue working with me, Dave, and the executive committee.

Corporate Communications

Centrally, we will have a global corporate communications team focused on public relations and internal communications. Managed by Sarah Cain, this team will be responsible for building strategic plans and programs to effectively communicate our messages externally and internally. All other marketing will be handled at the BU level. Sarah will report directly to Mickey Wilson as they determine how this organization evolves.

Business Unit Realignment

At the BU level, resources are being realigned to support key strategic initiatives that represent the biggest opportunities and drive greater efficiencies. Here are some highlights from those changes:

With the move to an open API, CNET will move its services, catalog, content management system onto one platform, making content development, syndication and content import easier and more open

Within the business group, we have preserved our core investments in BNET, while aligning more of our resources to accelerate the brand’s growth. At the same time, we have realigned our investments in TechRepublic and ZDNET to improve monetization.

TV.com will put more emphasis on areas of most interest to their audience including entertainment features, breaking news, trivia competition, and polls, rather than original video programming

Stay tuned for more information about specific changes to your BU from your business unit leaders.

International

Lastly, as I talked about during last quarter’s earnings call, to further accelerate growth and leadership in China, the company is considering raising capital from local partners. We are also in the process of making additional decisions about our international business. I will be sharing more information about that in the coming weeks.

Today, difficult decisions were made. Each individual that was affected by these changes deserves our respect and gratitude for helping to make CNET Networks into the company it is today. And, while it is never easy to see our friends and colleagues leave us, together, we will work through this transition and stay focused on our goal to grow the company’s brands, revenues, and profits.

Best, NA

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CNET Soap Opera Continues; CEO Neil Ashe May Be Fighting For His Job

Despite CNET’s unexpected legal setback last week in their fight against what is now their largest stockholder (a consortium of investors led by Jana Partners), the board and management team continue to fight on. Previous meetings between Jana and the CNET board were already “tense and uncomfortable.” I can only imagine they’re getting more so.

So far, the Jana consortium has not demanded an ouster of CNET CEO Neil Ashe as part of their proposed reforms of the ailing company. But that may be changing, says a source close to the drama. “Jana’s patience with Neil has run out, they’re now looking to get rid of him,” said the source. When a company’s biggest stockholder (holding nearly 25% of the outstanding stock) wants you to resign as CEO, it becomes difficult to both fight for your job and simultaneously “maximize shareholder value.”

If Ashe is forced out, who might step in as CNET’s CEO?

There are no shortages of rumors here, either. One insider says former CEO Shelby Bonnie may be right for the job. Bonnie resigned as CEO in October 2006 following an options backdating scandal. Later, though, the SEC completely exonerated Bonnie and CNET and dismissed the charges. He is still a major shareholder in CNET and owns about 7% of the outstanding stock. And so far Bonnie hasn’t taken a side in the fight - most other major shareholders are backing current management.

Bonnie, however, has moved on to his new venture, PoliticalBase, and hasn’t shown any outward desire to return to CNET.

Another name that has come up as a possible CEO candidate is Dan Rosensweig, the former COO of Yahoo and who’s currently a partner at private equity firm Quadrangle Group. Rosensweig was formerly the President of CNET, a position he took on following the merger of ZDNet and CNET in 2000. Rosensweig would likely be interested in the job, said someone who’s familiar with the situation, but only if the board of directors invited him to come on board. From what we hear, the Jana consortium might also be interested in pushing him as an alternative to Ashe.

Rosensweig would find himself in a familiar situation. Not only did he previous work at CNET, his right hand Editor-In-Chief at ZDNet, Dan Farber, recently took the top spot at CNET News as well. They remain friends - when Rosensweig left Yahoo, he only gave one personal interview - to Farber. Perhaps they’ll get the old band back together for an encore.

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Why Is Natali Del Conte Speaking Spanish?

I’m pretty sure that’s former TechCrunch writer Natali Del Conte speaking Spanish. Yep, that’s definitely Spanish all right.

Natali, who recently launched a new show on CNET TV called Loaded, is now creating Spanish versions of the show, covering product reviews in five popular categories including cell phones, MP3 players, televisions, computers, and digital cameras.

The show is created for Univision, which targets Spanish speaking U.S. residents. If you’re a Natali fan and couldn’t care less what language she’s speaking, tune in here.

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