Changes are coming to CNET Networks (NASDAQ:CNET) now that the company is conceding that its hands were caught in the options backdating cookie jar. Along with the admission, CNET CEO Shelby Bonnie will be stepping down, as well as the company's general counsel and head of human resources.
As if that wasn't bad enough, the company also warned that it's likely looking at about $92.8 million in September quarter revenue. That just misses the $93 million to $96 million top-line range that the company had previously provided. The current quarter is poised to be even more challenging. For all of 2006, CNET is now looking to generate revenue between $376 million to $386 million. Its earlier guidance stood at a range between $386 million and $403 million.
Delayed filings over accounting irregularities? Weakness as ad spending in the video game and computing spaces runs limp until next generation introductions in the coming weeks? Not good. The shares opened nearly 10% lower this morning on the news, although the shares did bounce up off the early trading swoon.
Is CNET doomed? Why would one suggest that? Do you think that a software developer relying on Download.com as a gateway to the consumer or a Call of Duty addict hitting GameSpot.com for gaming tips is going to ever say, "Those cats backdated their stock option grants. I'm outta here!"? No, CNET will keep moving just as other companies like Apple (NASDAQ:AAPL) and McAfee (NYSE:MFE) have done. Going by the fact that McAfee shares are trading higher on similar board shuffling moves, it would seem that today's weakness in CNET is related more to its warning than the accounting news.
Is that troublesome? Not yet. Once Microsoft (NASDAQ:MSFT) introduces Vista in a few weeks and the number of PS3 and Wii units are plentiful, then I'll worry whether sponsors have ad budgets to ramp up and CNET isn't cashing in. I don't think that will happen, though.
CNET is too wide of a dot-com content powerhouse to let that happen. If anything, as Neil Ashe steps up to assume the CEO post, trading in CNET may start getting spicy if buyout offers begin trickling in, as they often do when companies are in a state of flux.
There were a lot of press releases issued by CNET this morning, but the news is just starting to happen.
CNET is an active recommendation in the Motley Fool Rule Breakers newsletter service for high-octane growth stock investing. If you want to learn more, take advantage of the service's free 30-day trial. Microsoft is an Inside Value selection. McAfee is a former Stock Advisor pick.
Longtime Fool contributor Rick Munarriz has been known to backdate a birthday present or two after a momentary lapse -- but nothing worse. He does not own shares in any of the companies in this story. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. T he Fool has a disclosure policy.
