Please ensure Javascript is enabled for purposes of website accessibility

CNET's Chalk Outline Was Written on the Wall

By Rick Munarriz - Updated Apr 5, 2017 at 9:27PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

CBS will buy CNET at $11.50 a share.

The crime scene isn't pretty. It never is. You have yellow tape draped over what used to be red tape. You have a body that gave up the ghost before its time. Witnesses give awkward smiles, if only because they know that CNET Networks (Nasdaq: CNET) -- this morning's cadaver -- is redefining the term "exit strategy" in being bought out by CSI broadcaster CBS (NYSE: CBS) at $11.50 a share.

A crime was certainly committed. Now it's time to determine if the perpetrator was CBS or if the fatal wounds were self-inflicted.

It's probably the latter. In fact, once the lab results come in, Gil Grissom and his crew of super-sleuths will discover that CNET may have been dead for years.

The fall and rise of CNET
I recommended CNET in the summer of 2005 to Motley Fool Rule Breakers subscribers. I followed up with a re-recommendation the following summer when the stock fell into the single digits, and the stock remains an active newsletter pick.

Cracking open the CNET portfolio of online properties can make even a cynic giddy. It's not just the namesake tech gadgetry site. CNET also owns video game haven GameSpot, tech reporting site, comparison shopping site MySimon, software hub, and techie hangout TechRepublic.

Some of its most recent moves have been to cash in on its juicy collection of generic lifestyle domains.,, and are now thriving hotbeds for couch potatoes, music fans, and foodies, respectively.

The real shame with CNET -- the reason why Dr. Market hasn't been able to detect a pulse in ages -- is that the company's financial performance failed to live up to its prolific dot-com standing.

Last month's quarterly report was frustratingly typical. CNET posted an operating loss. The company mustered a mere 3% revenue gain, and only because a 25% improvement abroad was enough to offset a 3% domestic decline.

CNET proved frustrating on both ends of the income statement. The top line wasn't able to live up to expectations, as nimbler blogs ate into its tech news stronghold. The bottom line was denied by an editorial-heavy company, even as its own ad sales team was enhanced through third-party deals with both Google (Nasdaq: GOOG) and Yahoo! (Nasdaq: YHOO).

It's not as if CNET ever stopped trying. It went out kicking. It unloaded Webshots last year to American Greetings (NYSE: AM), when the tough-to-monetize photo-sharing site was waning in popularity. Some of its most recent launches, like corporate lifestyle website BNET and cooking community site, have been promising rookies.

Unfortunately, all of CNET's promise never materialized into the quarterly performance that growth investors expect. Throw in the 2006 options backdating scandal and this year's activist shareholder uprising, and any palm reader could have told you that CNET's lifeline was going to be painfully short.

Eye on CBS
CBS is going to like what it gets for its $1.8 billion. It's not just about the CNET properties that everyone knows. has always been a search engine waiting to be awakened. CNET also owns, an underutilized domain that would fit in perfectly with CBS' family-friendly programming, if not an eventual rival to Disney's (NYSE: DIS)

Despite its sleepy broadcasting frame, CBS has been a dot-com nibbler lately. Recent purchases include Web radio giant and the WallStrip stock video series. The company must be drooling at what it can do with CNET sites like, ZDNet, and Urban Baby.

Am I surprised that the ultimate victor isn't a traffic-hungry Google chaser like Yahoo! or Microsoft (Nasdaq: MSFT)? I am, but CBS actually makes even more sense. It is in a better position than the Microhoo crew to make this work. CBS will be able to breathe new life into CNET's rigor mortis-stricken monetization skills. CBS has a deep bench of advertisers through its television, radio, Internet, and even billboard businesses.

This morning's press release claims that CBS will become one of the 10 most popular Internet companies after the purchase, reaching a global audience of 200 million unique visitors.

The deal makes sense for both companies. You can call off the CSI team. The only crime that was committed here was the failure to live up to expectations. Bring in Survivor host Jeff Probst, though. The tribal council has spoken, and it's time to put out CNET's torch as a publicly traded stand-alone company.   

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Paramount Global Stock Quote
Paramount Global
$33.91 (4.66%) $1.51
The Walt Disney Company Stock Quote
The Walt Disney Company
$109.32 (3.51%) $3.71
Microsoft Corporation Stock Quote
Microsoft Corporation
$273.24 (2.76%) $7.34
Alphabet Inc. Stock Quote
Alphabet Inc.
$2,246.33 (4.20%) $90.48
American Greetings Corp. Stock Quote
American Greetings Corp.

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/29/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.