CNET Broadens Again

Like Yahoo! (Nasdaq: YHOO  ) , Amazon.com (Nasdaq: AMZN  ) , and so many other Internet companies, CNET (Nasdaq: CNET  ) is actively pursuing a strategy of broadening its revenue sources. The long-held belief that specializing and being good at one thing are the way to go don't hold true in the Web world, unless you define one thing as broadly as making money from the Internet. Yesterday, in conjunction with its second-quarter earnings report, the multifaceted company said it will purchase privately held Twofold Photos (which runs the Webshots site) for $70 million.

I'm surprised this little outfit hasn't been scooped up sooner. It has had an uncanny ability to survive where others have failed. Yes, many have tried and failed in the online photo storage and printing business. Some shuttered their doors -- or websites, at least -- with little or no warning. But Webshots has weaved its way through the wreckage, boasting 58 million photos to become the world's largest photo site. That includes beating out the likes of Eastman Kodak (NYSE: EK  ) at its own game.

The company expects the new purchase to be accretive to sales in the fourth quarter of this year, adding $3.5 million. On its own, Webshots is expected to take in $12 million to $13 million this fiscal year. For 2005, Webshots should produce revenue growth of 30% to 35%. It's a fine addition to a growing suite of services, which include a music-downloading service of its own at Download.com and the recent purchase of the MP3.com domain.

For the second quarter ended June 30, CNET increased revenue 17% to $68.1 million from a year earlier. And it narrowed its net loss to a decline of $1.5 million, or $0.01 per share, from a decline of $11.6 million, or $0.08 per share, a year earlier.

For the third quarter, CNET anticipates sales of $68 million to $70 million. The firm's outlook looks good, with expected revenue of between $285 million and $292 million for the year, including the addition of Webshots. Hey, CNET, smile for the camera!

Fool contributor Mark Mahorney doesn't own shares of any companies mentioned.


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