A Homestore investment takes it toll

Cendant, which had a 20 percent stake in the online real estate company, posts a hefty after-tax charge largely because of Homestore's plummeting stock value.

2 min read
Homestore.com's troubles are starting to spread.

Cendant, a company whose brands include Ramada, Jackson Hewitt and Avis, recorded a $285 million after-tax charge last week, largely because of a write-off of the company's stake in Homestore. Cendant said the fall-off in Homestore's stock value was to blame for the charge, which wiped out the gain the company saw when it sold Move.com to Homestore last year.

The write-off will have "no impact" on Cendant's relationship with Homestore, Cendant spokesman Kevin Meyer said. As part of the Move.com deal, Cendant had signed a 40-year agreement to provide real estate listings to Homestore from Cendant subsidiaries Century 21, Coldwell Banker and ERA.

"We disclosed publicly late last year that there was a possibility that this would be written down to zero," Meyer said.

Homestore representatives did not immediately return calls seeking comment. The company operates sites including Realtor.com that provide resources for finding housing, moving and making home improvements.

Homestore, once one of the few dot-com successes, has fallen from grace with investors in recent months. The company's stock has fallen 97 percent in the past six months amid two rounds of job cuts, a management shake-up, several shareholder suits and an earnings restatement.

Last month, Homestore said it overstated its revenue by $54 million to $95 million during the first nine months of last year. After the announcement, the Chief Executive Stuart Wolff resigned and was replaced by a new executive team.

After an investigation into its accounting practices led to the ouster of seven other employees, Homestore announced last week that it was cutting 300 jobs--about 11 percent of its staff--as part of a reorganization.

Homestore's ongoing problems have led some real estate partners to question their relationship with the Westlake Village, Calif.-based company. Some multiple-listing services, which aggregate real estate listings for particular metropolitan areas, have ended their exclusive relationships with Homestore, choosing instead to provide listings to Microsoft-backed rival HomeAdvisor.

Homestore has yet to post its fourth-quarter results, but Cendant's earnings report may hint at what is to come. Cendant had a 20 percent stake in Homestore as of last April and said its portion of Homestore's fourth-quarter losses were $21 million during the quarter.

Cendant representatives said they did not know how the company would be affected by Homestore's revenue restatement.