CNET Chows Down

Content may be king, but sometimes the kingdom is weak. That's how it was at CNET (Nasdaq: CNET) in its fiscal first quarter. The company posted better-than-expected results, but watered down its full-year outlook because of some temporary product delays in the areas where its content resides.

Attracting the techies at hubs such as TechRepublic and News.com has often been a sound strategy for CNET. But with Microsoft (Nasdaq: MSFT) delaying the release of its Windows Vista operating system, the company expects sponsors to slow their related ad spending through the rest of the year. A similar lull is taking place in the video game industry, with next-generation consoles from Nintendo and Sony (NYSE: SNE) still at least months away from stateside rollouts. That will have an impact on spending at the company's popular Gamespot.com enthusiast site.

Even though the computing and gaming delays are likely to spill over and create robust results next year, CNET will be tested through the rest of 2006.

CNET now expects to earn between $0.18 and $0.23 a share this year -- or between $0.31 and $0.37 excluding stock-based compensation. Revenue, which the company had originally expected to come in between $395 million and $407 million, will now clock in between $386 million and $403 million. Analysts now find themselves perched at the high end of the company's revised range, expecting earnings of $0.23 a share on $403 million in revenue.

The company's shares took an 8% hit in after-hours trading Monday night. But the pessimism appears to be overdone. The company is still within Wall Street's target ranges, and the seeds are in place for an explosive 2007.

As for the March quarter itself, the company generated $20 million in free cash flow. Metrics stepped up nicely, with a 4% uptick in page views, a 10% spike in unique visitors, and a 17% surge in revenue. Traffic was sluggish for the tougher-to-monetize eye candy at Webshots.com, but page views outside the photo-sharing site were up an impressive 18%.

CNET also announced the acquisition of Chowhound.com and the editorial team of the now defunct Chow Magazine. The company will combine the two to launch Chow.com this summer. Like a great recipe, all of the ingredients are there for another successful rebranding effort -- like the one CNET achieved last year when it acquired TVTome.com to flesh out its attractive TV.com domain. Under the best-case scenario, the company will have a credible competitor to popular dining-review sites like IAC/InterActive's (Nasdaq: IACI) Citysearch.com and Time Warner's (NYSE: TWX) AOL City Guide. And even under the worst scenario, Chow.com offers the opportunity to take the loyal Chowhound community and clean up its clunky interface and sorry monetization strategy, which consists mostly of poorly placed Google (Nasdaq: GOOG) AdSense ads in all the wrong sizes and all the wrong page places.

It should be another good catch for CNET. As for potential investors, picking up shares here -- with prices in the pre-teens -- may be a catch of the day.

CNET shares were recommended last summer toRule Breakersnewsletter service subscribers. Time Warner is an activeMotley Fool Stock Advisorselection, and Microsoft has been singled out toInside Valuereaders. Try out your favorite Foolish investing service free for 30 days.

Longtime Fool contributor Rick Munarriz is a fan of CNET, but he does not own shares in any of the companies mentioned in this story. The Fool has a disclosure policy. Rick is also part of theRule Breakersnewsletter research team, seeking out tomorrow's ultimate growth stocks a day early.