The CNET Train Wreck?

| About: ChinaNet Online (CNET)

Last year, CNET (NASDAQ:CNET) was being hailed as a likely acquisition target for an amount flirting close to $2B. The company's market cap was floating northwards of $1.5B. I held a position in the stock because the macro and micro markets were positive and indeed there was a premium placed on the stock over a potential sale to Viacom (NYSE:VIA), Google (NASDAQ:GOOG), News Corp. (NASDAQ:NWS), Yahoo! (YHOO) - you know, the usual suspects.

But then those rumors went nowhere and it was clear that CEO Shelby Bonnie was in no mood to sell. He was one of those CEOs who probably needed an additional premium to give up control. I think that - and not the $2B price tag CNET wanted - killed any deal, really.

People matter more in business, and M&A in particular, than we like to think. That’s certainly not a knock against CNET or Mr. Bonnie.

Anyway, this year, a perfect storm hit CNET:

- it missed out on the video craze by not opening up Webshots to video sharing,
- blogs began to eat away at its market share in all things tech,
- it did not diversify away from tech into lifestyle quick enough,
- an options pricing scandal led to Bonnie’s resignation,
- Yahoo!’s stock fell 40% (killing its pricey acquisition appetite),
- Viacom’s stock plunked (ditto),
- News Corp. closed its cash register and acquisition guru Ross Levinsohn resigned…

All said, the acquisition premium vanished, CNET now is stuck in that $8-10 range, it’s up from the $7 rut it hit in August, (incidentally, I wrote this in July, when it was at $7 bucks, you should have listened, it’s up to almost $9 now) but will it strike the $12-15 range it crossed last year? Probably not.

Valleywag is now reporting that the company might be broken up and sold in pieces. I think that is somewhat drastic, it’s still a nice collection of assets and a helluva strong brand. In other words, there is a world outside of the blogosphere.

CNET 1-yr chart:

CNET 8 12 06

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