The battle over the future of CNET continues. This morning the Jana consortium, which announced an attempt to take control of the CNET board of directors in January, published a website and white paper (embedded below) to support their effort.
Jana and its co-investors now own 14.9% of CNET, plus another 8% in non-voting derivatives. Their primary goal is to get voting control of the board to push through a broad agenda to reform the ailing company. But that hasn’t gotten them much face time with CEO Neil Ashe and the rest of the executive team. From reports, CNET has treated Jana as an outsider, despite the fact that they are the largest or second largest shareholder in the company. CNET sued to throw out Jana’s claims for board seats based on a technicality. That suit was dismissed quickly, but an appeal was filed last week.
At this point, the CNET team is trying to firm up the financial status of the company in advance of their annual shareholder meeting in June to have any chance of staying in control (and keeping their jobs). Jana, meanwhile, will be attempting to win points with the other stockholders to get their votes for the board slate they are proposing at that meeting.
The CNET board currently consists of eight directors. Two are up for election at the upcoming meeting (Peter Currie, Elizabeth Nelson). Jana wants to replace those two directors, and add five new seats, giving they 7 of 14 directors and voting control of the board.
The message Jana is sending to the CNET stockholders is straightforward and blunt:
Despite premiere brands and content, CNET Networks Inc. (”CNET”) has consistently underperformed peers and destroyed enormous shareholder value. We believe there is still time to reverse course and unlock value, but in order to do so CNET must undertake transformative change to strengthen its core assets and move from its “Web 1.0″ roots to the modern Internet industry. We believe CNET’s current leadership has failed to offer shareholders any evidence that it possesses either the necessary sense of urgency or the experience and expertise needed to lead this change successfully.
and
Despite owning leading web properties, over the past few years CNET has consistently underperformed its peers due to a failed strategy and an inability to proactively seize upon new opportunities and challenges in an effective manner. The majority of the current Board has overseen a 45% decline in shareholder value since 2005.
The white paper is an even broader condemnation of the management team. It begins with “The leadership of CNET…has presided over massive value destruction…CNET’s current leadership now claims it can reverse course and begin creating shareholder value, but we believe they have offered no evidence that they can do so.” They also point to data showing a three year, 25% decline in CNET stock v. a 40% gain in the Morgan Stanley Internet Index.
Jana’s plan: Bring in “new leadership” to CNET to execute on a new strategy focused on “strengthening core assets.” The plan is centered on improving advertising technology and organization, improving navigation and SEO strategies, and leveraging social media to boost growth. They also call for an improved content management system and significant cost reductions. Revenue per employee in 2007, they say, was dead last compared to CNET’s peers.
Starting on page 31 of the document below Jana also provides a timeline of events showing an increasingly hostile relationship between the parties.
“move from its “Web 1.0″ roots to the modern Internet industry.”?
yeah, all they needed for saving was pile on some ajax, and offer some social networking crap that one uses for 2 days and then even forgets the site name of.
i’m sick of hyping this web 2.0. I’d be happy when all these crappy sites go down under in the next year.
Old business models work, and probably will most of the time. Linking Cnet’s problems to ‘not web 1.0 thinking’ is a symptom of too much of the dubious web 2.0 thinking.
“consistently underperformed” = “EPIC FAIL”
CNET has led the internet in ad types and technology. They had first mover advantage in the tech news space. Quite frankly, if they had been agile and opportunistic, they would be covering internet startups so authoritatively that you would have had trouble getting traction for TechCrunch. I’d be more interested on somone’s take on why it’s going wrong and what it will take to fix it.
I believe CNET will have to make purchases in order to survive… who actually reads CNET?
They own two VERY VERY valuable web properties possibly worth their market cap, though: GameFaqs and GameSpot… as a person who just left highschool, those sites are very large among the gaming community and attract a boat load of traffic…
That is to the point, I wonder if the shareholders have read this.
Is TC pulling another April Fools joke today? Everytime I leave a comment and fill out the website field my comment does not appear. Is there a glitch?
“…Jana wants to replace those two directors, and add five new seats, giving they 7 of 14 directors and voting control of the board…”
I’m assuming you meant 13 directors, not 14.
Leo - 80+% of CNET is controlled by just 13 stockholders. My guess is they’ve all been well briefed.
A lot of the whitepaper is factually inaccurate and in some cases false.
For a group touting the social web, it is ironic that the Jana website provides no forum to discuss the whitepaper.
It is very difficult for medium-sized companies to jump move out of their existing state and comparing them to much larger industry leaders is not much user.
Nothing the Jana group would do will have any impact on the growth of the company. It would be even money that the stock would go down.
CNET started out as a cheesy TV show for newbies, that’s been my opinion ever since. If they wanted to be taken seriously they should have started over with a new name. WIRED on the other hand was fascinating to me as a freshman in college, I remember the early magazines, bright orange and metallic silver pages, the writers listened to Electric Ladyland, they told us what was “tired” and what was “wired”, where I first learned about Java back in 1994. That’s about the time I stopped reading Boardwatch and PC Magazine as I lost interest in hardware and BBSs.
Hey Antanu…..Are you kidding me with your comment???
Web 1.0 with little to no user interaction and failed attempts to drive Website traffic is the reason why CNET is failing. Their focus in the 90’s was great, but that style is outdated.
Web2.0 methadologies is what CNET requires to simply drive traffic back to their website…That is how CNET can compete with their competitors who are all killing them right now in terms of growth….
Web2.0 is an overhyped term, i agree, but the core meaning is what all companies need to adopt if they are to survive…
This is crap! Jana is nothing but a bunch thugs trying to “carjack” CNET. What does Jana do?, what do they produce? Nothing. They are a hedge fund that is only interested in making money. Have you seen the list directors they are proposing? Losers that got fired from other companies that can’t get a real job. And the proposals, garbage. It just shows how little Jana actually understands the business.
This has nothing to do with web 1.0, 2.0, 3.0 blah blah. It is about MONEY. Jana bought the stock at $X and wants to sell at $Y and will do and say anything to pump the price up.
You should give CNET to Jason Calacanis. He would run the company well and it would be a brilliant match to Mahalo. /TJN
CNET have clearly lost their way. What they need is someone at the top who really understands technology, knows where its headed and can shape the company to take advantage of that. But more importantly it needs to be someone who is out there connecting with people and can attract the best people to turn the business around. Of course you need some great business accumen as well. I see guys like Jason Calacanis doing great stuff and cant help but think maybe…just maybe… thats who they should be looking for.
There is hope in all these brouhaha… they should all give way so that TJN can take over as CEO of CNET.
Good story. CNET needs an overhaul. There are lots of good people that work there. The brand is valuable with all the content and domains.
Someone like Jason Calacanis and Mahalo could really make a difference.
-Victor
TJN
Jason Calacanis to run CNET, are you out of your mind? That guy to is so not capable of running a 2,500 (?) person, public-traded company. He’s a lounge lizard with some pretty good tech startup skills, but no chance he’s capable of a complicated company of this scale.