CNet grows beyond 2Q expectations

Strong user growth in the second quarter helped CNet Inc. (Nasdaq: CNET) top analysts' estimates.

In results released after market close Thursday, the online provider of technology news and information posted pro forma net income of $5.4 million, or 7 cents a share, not including goodwill amortization, equity losses and gains on the sale of equity investment. First Call's survey of seven analysts predicted a per share profit of 5 cents.

Second quarter sales increased almost 31 percent sequentially, to $25.6 million from $19.6 million in the previous quarter, when CNet earned $3.4 million, or 9 cents a share.

"During the second quarter, we realized record margins for the company, demonstrating the leverage in our business model, said Halsey Minor, CNet chairman and CEO. "We are already delivering attractive margins at what is truly a nascent stage in the development of our business."

Including goodwill amortization and equity events, second quarter net income was $9.2 million, or 11 cents per diluted share.

CNet Online saw revenues rise 32 percent from the previous quarter, to $23.8 million from $18 million. Average daily page views improved to 10.8 million, a 14 percent gain from 9.5 million in the first quarter. Unique users rose to an average of 8.2 million in April and May, up 10.7 percent sequentially.

CNet plans to boost marketing with a $100 million campaign over the next year and a half, including $20 million to $25 million in the third quarter, and $30 million to $35 million in the fourth. "There is a clear opportunity to make CNet the prototype for technology news and information, in the way that ESPN is for sports and MTV is for music," Minor said.

Television generated a "slight" profit on revenue of $1.8 million, the company said. CNet Television, which produces five weekly shows with plans for a sixth to air on CNBC this fall, saw revenue of $1.9 million in the second quarter of 1998.

Shares of CNet picked up 1 1/8 in Thursday's trading prior to the earnings release. Of 10 analysts surveyed by Zack's Investment Research, two recommend Cnet as a "strong buy", five describe the stock the equivalent of a "moderate buy", and three maintain "hold" ratings.

ZDnet competes with CNet.>