More Trouble at CNET: CEO Axed, Revenue Below Guidance, Traffic Way Down

CNET (CNET) on Wednesday announced that Chairman and CEO Shelby Bonnie, a co-founder of the company, has resigned, the latest victim of the option-backdating scandal. Bonnie was replaced as CEO by Neil Ashe, a former Smith Barney investment banker who has been a CNET exec since 2002.

CNET said its general counsel, Sharon Le Duy, and head of human resources, Heather McGaughey, also resigned. (The company’s news release identified them only by title and not by name; the links above are from a cached version of the CNET Web site found via a Google search.)

The company today also named Jarl Mohn, a former CEO of Liberty Digital and E! Entertainment Television, as non-executive chairman.

The company said that its options investigation found instances of backdating starting with the CNET IPO in 1996 through at least 2003, resulting in accounting issues that will require financial restatements. CNET said Bonnie, its former CFO (presumably Doug Woodrum, who held the role for seven years until stepping down in late 2004), the former general counsel and the former head of HR “bear varying degrees of responsibility” for what happened.

CNET said no current employees and none of the “recently resigned employees” engaged in intentional wrongdoing.

CNET also said that the resigned executives and directors who received improperly priced options have agreed to have them repriced to fair market value on the appropriate measurement date.

In a statement, Bonnie apoligzied for “the options-related problems that happened under my leadership.”

CNET said it couldn’t yet quantify the charge it will have to take to earnings.

Meanwhile, the company also said that third quarter revneue was about $92.8 million, below previous guidance of $93 million to $96 million; the company now expects full year revenue of $376 million to $386 million, down from previous guidance of $386 million to $403 million.

The company said it will not be filing its third quarter 10-Q on time; it expects to formally announced third quarter results on October 23.

UPDATE: The drama surrounding the ousting of co-founder Shelby Bonnie and several other executives from CNET over stock-option backdating issues somewhat overwhelmed the more mundane news that the company had a crummy quarter. But clearly, there are more troubles at CNET than simply options backdating: it seems to be losing its audience. Youssef Squali, the Internet analyst at Jefferies & Co., says ComScore data suggests that traffic has been crumbling at some of the company’s core sites, with an overall 50% year-over-year drop in page views for all CNET properties in the third quarter. (Squali says his own estimates were for a 5% decline.)

Squali says that according to ComScore, page views fell 54% versus last year at CNET.com, 21% at Gamespot and 30% at ZDNet. Page views at Webshots, the company’s photo sharing site, dropped 69%, as it suffered in the face of competition from more popular social networking sites.

With the stock-option investigaiton completed and the management revamped, Squali speculates that CNET could become a potential acquisition target from a large media player looking to stake out some ground on the Web. (CNET in the past has repeatedly been the subject of takeover rumors.)

Nonetheless, Squali is not enthusiastic about the stock. Even given the potential for a bidder, he says, “given the weak business momentum and CNET still trading at 13x FY 07 EBITDA, we find it hard to be constructive at these levels.”