Services & Software

NBC buys stake in CNET, Snap

The TV network agrees to buy a 4.99 percent stake in the Internet firm and will run a joint venture with CNET's portal service.

NBC announced yesterday that it has purchased a 19 percent stake in CNET's Snap Internet portal service, and that it will operate the service as a joint venture.

NBC paid $5.9 million for its stake in Snap, and has an option to buy up to 60 percent of the online service for a total of $38 million. NBC also said it acquired a 4.99 percent equity stake in CNET, Snap's parent company, for $26 million.

The deal also calls for NBC to assume the cost of running Snap, and to gain a majority representation on Snap's board. CNET chief executive Halsey Minor will continue as Snap's CEO on an interim basis. Snap is a division of CNET: The Computer Network, which publishes NEWS.COM.

"After the deal closes, CNET will no longer have an ongoing financial commitment to the venture," said Minor. "We have a business plan and believe the amount of money that NBC is investing is sufficient to get the venture to break even."

CNET stock skyrocketed on the news, gaining more than 37 percent in yesterday's trading. The shares were up 3.6250 in early trading this morning, at 48.7500, beating the company's previous 52-week high of 46.5000.

Yesterday's announcement gives Snap the traffic boost it has been waiting for, and propels it from relative obscurity into potentially a major player in the portal landscape, said Daniel Rimer, an analyst at Hambrecht & Quist.

"The value that NBC provides to this deal is enabling Snap to become one of the more crucial portals on the Internet and to tap into fairly virgin territory, which is the NBC viewer audience," he added.

The joint venture marks another move into the Internet space for NBC, which has a partnership with Microsoft in MSNBC--a 24-hour cable news network and Internet news service. The network also has launched NBC Interactive Neighborhood, which features local community guides customized for the network's affiliate stations.

NBC chief executive Bob Wright said in a press conference yesterday that the investment in Snap is designed to bring greater visibility of NBC's content to the Internet.

Executives from both parties said the joint venture will pursue an initial public offering for Snap, at an appropriate time and under appropriate circumstances.

"Part of the value of the portal business is developing companies that need the exposure and distribution that a portal provides," said Marty Yudkovitz, president of NBC Interactive Media. "To sweep up companies with just cash is not simple."

"Having a publicly traded stock gives more currency to business," added Minor.

For CNET, the move seeks to bring brand awareness of Snap to NBC's millions of TV viewers. Snap will continue its relationship with its 70 content partners, executives said.

The companies said they do not plan to co-brand the site, at least for now. Advertising sales for Snap will be handled by a joint team, rather than by CNET or NBC individually.