CNET Board Has “Tense, Uncomfortable” Meeting With Jana Consortium

Last Thursday, March 6, multiple sources say, the CNET (Nasdaq: CNET) board of directors and CEO Neil Ashe met with representative from the Jana Partners investor consortium that has amassed a 21% ownership stake in the troubled company. The goal of the meeting was to negotiate a settlement that would avoid a proxy fight and a potential hostile takeover attempt.

Jana Partners’ founder Barry Rosenstein was the lead representative from the consortium’s side, which also includes investments from Sandell Asset Management, Spark Capital, and entrepreneur Paul Gardi.

From what we hear the meeting didn’t go so well. “It was tense and uncomfortable,” said one source. The CNET board “is in a state of denial” about the seriousness of the situation, said another. The consortium wants the company to focus on technology, including an overhaul of the dated CNET content management system and ad serving platform. The CNET board instead wants to “aggressively expand” their business internationally and focus less on infrastructure improvements.

For now the two groups are mostly talking about high level company strategy. But at some point the consortium, which is the largest CNET stockholder, will want a significant board presence. That might mean as many as 3-4 board seats out of the 8 that exist now.

CNET stock continues to slump - it’s worth about half as much as it was two years ago. The company has recently made a few high profile management changes (all for the better, in my opinion) and has sold off assets. But deeper changes are clearly needed.