Is CNET For Sale?

[jmiller]

The New York Post dropped a big pebble into the online rumor pond this morning as it reported that CNET was “informally shopping itself to a host of media companies,” according to undisclosed sources.

According to the article, CNET has been in discussions with Viacom and InterActive Corp. about a possible sale. Add AOL and Yahoo to the mix of those rumored to be expressing interest and we may see a bidding war in the near future.

A CNET spokesperson declined to comment on the rumors saying, “It’s our policy not to comment on rumors or speculation.”

CIBC analyst Michael Gallant thinks buying CNET would be a good move.
According to MarketWatch, Gallant stated that CNET was a "logical candidate for an entertainment company given its strong management, diverse media properties, and entertainment companies' increasing desire to get bigger online."

CNET, currently valued at $1.6 billion generates 33.8 million unique visitors earning itself a No. 8 ranking on comScore Networks most visited sites.

That kind of web traffic is understandably attractive to interested buyers looking to get into the online advertising world. Online advertising is an industry expected to grow 30% this year.

If swallowed up by some larger entity, the sale of the online company would follow suit with a recent spate of market behemoths buying out smaller online buzz-makers. Last year, Dow Jones bought CBS
MarketWatch for $519 million; The New York Times bought About.com from Primedia for $410 million; InterActive Corp. bought Ask Jeeves for $1.85 billion; and Vicaom bout Neopets for a reported $160 million.

"What makes CNET attractive is its huge amount of traffic," said one source for the Post. "These media companies think they can turn it into the next Google or Ask Jeeves."

Google’s online success has caught the attention of everybody on Wall Street with stock prices rising from $85 to $300 since its debut in August and reporting $1.3 billion net profit in the first quarter.

CNET is expected to generate $352 million in sales this year. And though that it isn’t small change, many analysts believe that CNET is overvalued at this morning’s price of $11.33. Though Avalon Research sets a target price of $6, other analysts at CIBC World Markets say the stock could attain up to $14 a share.

CIBC goes on to doubt that Yahoo is showing genuine interest in acquiring CNET.

"Contrary to popular belief, we don't believe Yahoo would pay up to buy CNET given its tendency to buy companies that lack traffic and recognizable brands," the broker told clients.

So the questions remain. Is it true? If so, who’s the most likely to bid? Can it be turned into another Google or Ask Jeeves?

A sale would be a turnaround from CNET’s Shelby Bonnie’s comments to MarketWatch earlier this year that the company would remain independent.