Ugly Conference Call Moments -- CNET Blames Microsoft and Sony (CNET, MSFT, SNY)

CNET Networks' stock (CNET) fell almost 8% in after-hours trading last night after the company reported Q2 results and guidance that disappointed the Street. CNET's loss per share of a penny beat its own guidance of a loss of 2 to 4 cents per share and the consensus of a loss of 2 cents, but the top line wasn't great ($83.4 million, up only 17% year over year) and gudance was below expectations. Specifically, Q2 guidance of $88.5-92 million was below consensus of $95 million and full year guidance of $386-403 million was below the company's prior guidance of $395-407 million. Guidance for full year growth is now 15-20% instead of 17-21%.

On CNET's conference call, CEO Shelbie Bonnie attempted to explain the disappointing guidance. Here it is in his words:

Overall, the opportunity in online advertising only continues to strengthen. Having said that, it is an unusual year for us with two important industries both in transition simultaneously.

As you know, in March Microsoft delayed the release of Vista to 2007. While there is not a lot of immediate impact on sales, it does alter the marketing and product development plans at Microsoft and of the ecosystem of companies that rely upon it. You have seen companies like Intel cite weaker PC demand during the first quarter and research firms like IDC adjusting expectations for PC shipments following the Vista delay.

Additionally, a transition is occurring in the games industry as both Sony and Nintendo are expected to launch new platforms toward the end of 2006. However, as we saw in the first quarter, those dates have been changing. Transition cycles in the video game market caused a slowdown in game sales as game publishers wait for new platform availability to launch new titles. Fewer game titles launching this year due to the platform changes lead to less marketing spend and less sales dollars. Our position in the games industry this year has never been stronger and we continue to outgrow the market and increase our market share among game-related marketing spend.