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Homestore cutting jobs, hit with lawsuit

The real estate site is laying off hundreds as it disposes of "non-strategic businesses." Also, shareholders say misleading statements pumped up the stock price.

Real estate site Homestore.com is cutting 300 jobs as part of a business reorganization, the company said Tuesday.

Homestore also has sold its eNeighborhoods unit as part of the reorganization. A company representative said he doesn't know who bought the unit, which provides demographic and home sales information about neighborhoods around the United States.

"As a result of an extensive assessment process involving both customers and employees, we have refocused Homestore on its core business objective--making real estate professionals more productive and profitable," Mike Long, Homestore's chief executive, said in a statement. "By disposing of non-strategic businesses, and eliminating unnecessary investments and corporate services, the new Homestore is now centered primarily on improving the usefulness and quality of our real estate products and services."

The job cuts are the second round in five months for the struggling company, which operates sites including Realtor.com that provide resources for finding housing, moving and making home improvements. In late October, Westlake Village, Calif.-based Homestore announced it was laying off 700 employees--20 percent of its work force at the time.

The job cuts represent about 11 percent of Homestore's 2,700-person staff. The cuts are being made throughout the company; no particular department is being targeted, company spokesman Dan Wool said. Wool didn't know if any executives were affected by the layoffs. The company expects to eliminate the jobs during the first quarter of this year.

Homestore, once one of the darlings of the dot-com industry, has been reeling in recent months. The company's third-quarter revenue came in far lower than originally expected, with online advertising sales dropping 44 percent from the second quarter.

The company has yet to announce its fourth-quarter results, pending the outcome of an internal inquiry into the company's accounting methods. The initial results of that inquiry revealed that Homestore overstated revenue by between $54 million and $95 million during the first three months of last year.

Amid this financial turmoil, Homestore has seen a management shake-up. In December, two weeks before the company announced its inquiry, Chief Financial Officer Joseph Shew resigned, citing personal reasons. Last month, co-founder Stuart Wolff resigned as Homestore's chairman and chief executive, and Homestore's board brought in a new management team, including new chief executive, chief financial and chief operating officers.

Wool said the company has not yet set a date for releasing its fourth-quarter report, but the release would adhere to "guidelines." The Securities and Exchange Commission requires companies to file their annual report within 90 days of the end of their fiscal year. To follow those guidelines, Homestore needs to file its annual report by about March 31.

Homestore's financial problems have made it the target of several class-action suits filed on behalf of shareholders. The suits, the latest of which were filed on Tuesday, allege that the company reported misleading information about its financial prospects with the intent to boost its stock.