Homestore posts big 2001 loss

The struggling online real estate company posted revenue for 2001 of $325.1 million, up from $181.3 million in 2000. In the fourth quarter of 2001, the company lost $1.1 billion on $97.2 million in revenue. The annual report is expected to be the final restatement of its past financial performance.

Homestore's annual and fourth-quarter losses included a fourth-quarter write-off of $925 million worth of goodwill, intangible assets and prepaid marketing expenses.

Homestore announced late last year that it was conducting an internal investigation into its accounting practices. The U.S. Securities and Exchange Commission has launched its own investigation, the company has said.

As a result of its investigation, Homestore last month restated its 2000 financial results, acknowledging that its net loss was $31 million greater and its revenue was $49 million less than it originally reported.

Late last month, the company also reissued its financial results for the first three quarters of last year. The company reported that it lost $359 million in the first nine months of 2001, $113.2 million more than it originally reported.

Homestore also reported that it overstated its revenue during the first nine months of last year by $123 million, which is $10 million more than the company previously indicated. After the restatements, Homestore said its revenue for the first nine months of last year was $227.9 million.

Homestore spokeswoman Delise Keim said the difference between the company's earlier estimate of its overstatement and what it reported to the SEC was the result of the company being more "conservative" about recognizing revenue from the sale of its software products and services.

In its final restatement, the company deferred $37.4 million in revenue from its software unit; in February, the company said it would defer between $7 million and $23 million of this non-advertising revenue.

"We determined that we wanted to use as conservative a policy as possible," Keim said.

Once one of the bright lights among Net companies, Homestore has been reeling since last fall, when it warned investors that its loss would be greater than it initially indicated. The company has since gone through two rounds of layoffs, a management shake-up, and the threat of being delisted by the Nasdaq national market.

The company is also the subject of some 20 class-action lawsuits filed on behalf of shareholders alleging that the company made false or misleading statements in violation of federal law. Late last month, the lawsuits were consolidated in the U.S. District Court for Central California, with the California State Teachers' Retirement System named as lead plaintiff.

The company also is in arbitration with AOL over a marketing deal the companies signed in 2000.

Homestore had about $28 million in cash and short-term investments available to fund operations as of March 31, down from $52.5 million Dec. 31. The company expects that amount to jump to $85 million as a result of the sale of Consumerinfo.com, which it completed Wednesday.

Homestore expects to be cash-flow positive by the end of this year.

In the last several years, Homestore has been on an acquisition binge, spending more than $1 billion in cash and stock to purchase iPlace and Cendant's Move.com last year.