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Webshots is Leading Photography Web site Over 14 Million Monthly Visitors
Expected to Be Accretive to Cash from Operations in 2004 and Accretive to EPS in 2005
SAN FRANCISCO, July 14, 2004—CNET Networks, Inc. (Nasdaq: CNET) today announced that it has signed a definitive agreement to acquire privately-held Twofold Photos, Inc., and its Webshots Web site (www.webshots.com). Webshots is the leading Web site in the photography category1, and it boasts the largest publicly available collection of shared photo content. Under the terms of the agreement, CNET Networks will pay $60 million in cash and $10 million of deferred consideration. The transaction is expected to close in the third quarter of 2004.
Webshots adds to CNET Networks' market-leading portfolio of properties, and enhances the company's position as a premier global interactive content company that informs, entertains, and connects large, engaged audiences around topics of high information need and personal passion. In turn, CNET Networks can further enhance Webshots with relevant content—such as digital camera reviews, help and how-to's, and shopping services—from its world-class sites such as CNET.com.
Since its launch on the Web in 1996, Webshots has amassed by far the largest publicly available collection of photo content, with 58 million images and more than 300,000 new photos uploaded daily. More than 14 million people visit the Webshots community each month to browse, share and engage with fellow users about photos in a range of categories, such as travel, sports and recreation, birthdays, and weddings; activities that generate over 20 million average daily page views.2
While the Webshots and CNET Networks audiences share a passion for the digital lifestyle, the audiences are largely unduplicated. Together, the companies add significant reach and impression inventory for CNET Networks' marketing partners. With the addition of such significant scale, advertisers both inside and outside of the technology and consumer electronics industries will be able to expand their marketing efforts with CNET Networks. Webshots' primary revenue stream is advertising with additional contribution from subscriptions and the sale of prints and other photo merchandise.
"Our acquisition of Webshots is an outstanding example of strategically investing in assets that allow us to continue to fuel the growth of CNET Networks," said Shelby Bonnie, chairman and chief executive officer of CNET Networks.
"Webshots is a market leader with a large, passionate audience that complements the other market-leading properties in our personal technology, and games and entertainment categories, like CNET.com, Download.com, GamesSpot and MP3.com. We see a significant growth opportunity in emerging digital lifestyle categories and we are well positioned with high quality properties that have the scale to satisfy both our users and marketing partners," Bonnie added.
The Internet has enabled digital photo sharing to become a killer personal technology application, with significant growth opportunities. Digital cameras now reside in 39 percent of U.S. households, and unit sales are expected to increase by more than 30 percent this year3. In addition, digital camera owners take a lot more pictures than they did when shooting with film, and Webshots provides the venue for them to share those pictures with the world. In fact, about half of Internet users don't print any of their digital photos4.
"CNET Networks is the leading interactive content company with a history of building engaging environments for passionate users and a marketing infrastructure that will take our business to a higher level," said Narendra Rocherolle, founder and co-CEO of Webshots. "We are excited to work with the CNET Networks team to continue to innovate for our users and to grow Webshots.com."
Financial Highlights
Given the inability to predict the actual closing date, management is not providing any estimates of contribution from Webshots to its third quarter results. The company expects that Webshots will contribute approximately $3.2 million and $3.7 million in revenue, and $1.7 million to $2.0 million in operating income before depreciation and amortization in the fourth quarter of 2004. As a stand-alone entity, Webshots is expected to generate revenues of $12 million to $13 million and operating income before depreciation and amortization between $6.75 million and $7.25 million for the year ending December 31, 2004. For the year ending December 31, 2005, management expects Webshots total revenues to grow between 30 percent and 35 percent from the prior year.
CNET Networks expects the transaction to be accretive to cash from operations in 2004 and accretive to earnings per share in 2005. CNET Networks will be providing updated guidance for the remainder of 2004 in its second quarter earnings release today.
Conference Call and Webcast
CNET Networks management will host a conference call to discuss its second quarter financial results and acquisition of Webshots beginning at 5:00 pm ET (2:00 pm PT), today, July 14, 2004. To listen to the discussion, please visit http://ir.cnetnetworks.com and click on the link provided for the webcast conference call or dial (800) 344-1035 (international dial-in: (706) 679-3076). A replay of the conference call will be available through July 28, 2004 via webcast at the URL listed above or by calling (800) 642-1687 (international dial-in: (706) 645-9291) and entering the conference ID number 8488413. The company's past financial news releases, related financial and operating information, and access to all Securities and Exchange Commission filings, can also be accessed at http://ir.cnetnetworks.com.
Safe Harbor
This press release and its attachments include forward-looking information and statements that are subject to risks and uncertainties that could cause actual results to differ materially. These forward-looking statements include statements regarding the company's expected financial results related to its acquisition of Webshots and Webshots' expected stand-alone financial results, as well as other statements throughout the release that are identified by the words "expect," "estimate," "target," "believe," "anticipate," "intend" and similar expressions. These statements are only effective as of the date of this release and we undertake no duty to publicly update these forward-looking statements, whether as a result of new information, future developments or otherwise. The risks and uncertainties include: the risk that closing conditions will not be met and that the acquisition will not close, a lack of growth or a decrease in marketing spending on Webshots website; the failure of existing advertisers to meet or renew their advertising commitments; the loss of marketing revenue and users to Webshots' competitors; loss of users or customers by Webshots following its acquisition by CNET Networks, which could result in lower than expected revenue and operating income; failure of CNET Networks to successfully integrate Webshots' operations, which could result in increased expenses or loss of revenues; For general risks about CNET Networks' business, see its Annual Form 10-K for the year ended December 31, 2003 and subsequent Forms 8-K, including disclosures under the captions "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations," which are filed with the Securities and Exchange Commission and are available on the SEC's website at www.sec.gov.
About CNET Networks, Inc.
CNET Networks, Inc. (www.cnetnetworks.com) is a premier global interactive content company that informs, entertains, and connects large, engaged audiences around topics of high information need and personal passion. The company focuses on three categories—personal technology, games and entertainment, and business technology—and includes such leading brands as CNET, ZDNet, TechRepublic, MP3.com, GameSpot, CNET Download.com, CNET News.com, Computer Shopper magazine, and CNET Channel. With a strong presence in the US, Asia and Europe, CNET Networks has operations in 12 countries.
1Neilsen//NetRatings' June 2004 U.S. data
2Numbers in this paragraph are based on CNET Networks internal tracking and/or Webshots internal logs.
3March 2004, Consumer Electronics Association's CEA Market Research
42004 InfoTrends/CAP Ventures report
# # #
Investor Relations Contact:
Cammeron McLaughlin
(415) 344-2844
Cammeron.Mclaughlin@cnet.com
Media Contact:
Sarah Winterhalder
(415) 344-2218
617/225-3340
Sarah.Winterhalder@cnet.com
Posted by Darren in our News category on July 15, 2004