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Homestore makes another financial error

A month after saying it overstated revenue by up to $95 million in 2001, the online real estate company says it will have to restate its financial results for 2000 as well.

One month after admitting it overstated revenue by up to $95 million in 2001, Homestore.com acknowledged Wednesday it will have to restate its financial results for 2000 as well.

The struggling online real estate site gave no details on what errors it made in the financial reports it filed in 2000, saying only that it planned to conclude its ongoing inquiry and make the restatements by the middle of next month.

"Investors should not rely on the company's previously filed reports on Forms 10-Q for the quarters ended March 31, June 30 and September 30, 2001; the previously filed report on Form 10-K for the year ended December 31, 2000, or the financial statements contained therein," Homestore said in its statement.

Nasdaq halted trading in the company's stock before Homestore made the announcement. Even after the announcement, Nasdaq continues to bar trading until Homestore "has fully satisfied Nasdaq's request for additional information," Nasdaq said in a statement.

The trading halt is the second in three months for Homestore. Nasdaq barred trading in Homestore's stock from Dec. 21 to Jan. 7 after the company announced its accounting inquiry and while the company put together the initial details of that inquiry.

Homestore representatives did not immediately return calls seeking comment.

In addition to the restatement, the company also announced its amount of cash on hand had continued to deteriorate last fall. The company's amount of cash and cash equivalents dropped to $48 million on Dec. 31, down from $71 million on Sept. 31. Meanwhile, the company saw a rise in its restricted cash, from $90 million on Sept. 31 of last year to $100 million on Dec. 31.

As recently as six months ago, many analysts and investors considered Homestore to be one of the few successful dot-coms. But since then, the company has been hit with multiple shareholder suits as its revenue and stock price plunged and it has gone through two rounds of layoffs, a management shakeup and an internal accounting inquiry.

Last week, the company cut 300 jobs, about 11 percent of its staff, in a restructuring. Meanwhile, 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 falloff 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.

Cendant said the write-off will have "no impact" on its relationship with Homestore, one that includes a 40-year agreement to provide real estate listings to Homestore from Cendant subsidiaries Century 21, Coldwell Banker and ERA.

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.

Homestore did have some positive news to report Wednesday. The Westlake Village, Calif.-based company said it expects to have positive cash flow from its 2002 operations.

Homestore stock closed at 72 cents per share Tuesday.