CBS Turns Its Eye to the Web, Landing Network of Tech Sites

CBS will buy CNet Networks, one of the Internet's most-viewed family of tech-oriented sites, for $1.8 billion in cash, the two companies said yesterday, substantially expanding the online footprint of the Eye network and creating another May-December media marriage.

CNet, based in San Francisco, operates a number of sites focusing on gaming, music, entertainment, food and parenting. It might best be known for its software-download service and its well-regarded reviews of technology products. It has a substantial presence in China, which made it attractive to CBS.

With the purchase, CBS becomes the last major television network to own a big digital-content property, though it has picked up smaller ones in recent years, such as Lastfm.com, a music and social-network site. ABC parent Walt Disney has a large digital and Internet group, NBC bought women's site iVillage in 2006 for $600 million and Rupert Murdoch's News Corp. paid $580 million for top social-network site MySpace in 2005.

Quincy Smith, president of CBS Interactive and one of the executives behind the deal, said CNet would help CBS expand its presence in online search and social-networking and provide premium content that is becoming ever more popular.

"The time spent with online content has increased" in recent years, Smith said in an interview yesterday, "and we think it's undermonetized."

Smith said he believes CNet will fit well with CBS's mobile and outdoor-advertising divisions.

"We're thrilled to join CBS and combine our interactive media experience with CBS's world-class content," CNet chief executive Neil Ashe said in a statement.

The CNet purchase price of $11.50 a share represents a 45 premium on the stock's closing price Wednesday. The transaction has been approved by the CNet board and is expected to close in the third quarter, the companies said. Standard & Poor's analysts wrote yesterday they do not believe CBS overpaid for CNet.

Shares of CNet closed up $3.46 per share yesterday at $11.41. Shares of CBS closed down 59 cents per share at $24.23.

Citi Investment Research analysts noted yesterday that CNet generates about $12 per thousand page views in advertising revenue, outpacing its rivals. However, Citi analysts noted that CNet's free cash flow was flat from 2006 to 2007.

"We see the acquisition as broadly complementary to CBS's existing online business, but believe online acquisitions bring certain challenges different from those of traditional media bolt-on acquisitions. [Those include] technology, strategy, culture and back-office integration," Standard & Poor's wrote.

Hedge fund Jana Partners, which owns about 11 percent of CNet shares, has criticized CNet for its stock price and urged the ouster of its board. During the tech boom in late 1999, CNet traded for nearly $80 per share.