CBS buying online network CNET for $1.8 billion

NEW YORK — CBS Corp. said Thursday it will expand its Internet reach by buying CNET Networks Inc. for $1.8 billion in cash, paying a 45 percent premium for the online technology news and entertainment provider.

CBS will pay $11.50 per share for CNET, well above the closing stock price a day before. After the news was announced, CBS fell 2.4 percent to close at $24.23, while CNET rose 44 percent to $11.42.

New York-based CBS will take control of several popular Web sites, including CNET, ZDNet, News.com and gaming site GameSpot.com. It said CNET's properties will be combined with its online businesses, which include CBS news, entertainment and sports sites.

The combination will put CBS among the 10 most popular Internet companies with 54 million monthly visitors, the companies said.

"Our idea is to have our content wherever, whenever you can get it, and adding CNET just makes that happen faster," CBS Chief Executive Leslie Moonves said.

Saying there are few opportunities to acquire an Internet company like CNET, Moonves said the deal greatly expands CBS's presence in the fast-growing online advertising market.

The deal makes sense for CBS' Web strategy, boosting online advertising, but the price is a "head-scratcher," Forrester Research analyst James McQuivey said.

"It's hard to see how the CNET properties add up to a $1.8 billion price tag," he said. "Either CBS sees something in the potential synergy that the rest of us don't or they're willing to pay a premium just to get the deal done."

McQuivey said CBS is unlikely to make big changes to CNET sites to avoid alienating loyal users.

CBS noted that CNET has large international reach, with 200 million users worldwide and a big footprint in China. CNET also owns sites with notable Internet addresses such as TV.com, Search.com and mp3.com.

Executives said the deal should close in the third quarter following shareholder and regulatory approval.

Long a presence on the Internet known for technology reviews and news, CNET lately has faced increasing competition.

The San Francisco-based company reported a $6.1 million loss for the quarter that ended March 31. It had a $9.1 million loss for the same period in 2007.

CNET also has been beset by an internal battle with dissident shareholders upset about its slumping stock.

Last month, mutinous shareholders led by New York investment fund Jana Partners LLC issued a 38-page assessment calling CNET's leadership incompetent and lacking in efforts to turn the company around.

The dissidents, believing CNET could boost earnings with the right strategy, had waged a campaign for months to overthrow the company's board.

Jana Partners did not immediately respond Thursday to requests for comment about the CBS deal.

Buying CNET is the latest in a series of moves by CBS to bolster its online presence.

It announced a partnership Wednesday with EQAL Inc., a social entertainment company founded by the creators of the online video dramas "lonelygirl15" and "KateModern." Under that agreement, EQAL will help CBS extend its TV shows to create "experiences" online and on mobile devices.

In March, CBS launched a partnership between its TV stations and local bloggers and social media Web sites.

That involved CBS-owned stations providing them with online "widget" applications to display local news with links to CBS video and stories. Site owners would share a portion of revenue from ads in the widgets.

CBS also announced a deal in March to bring audio from its radio stations to listeners of AOL radio, a part of Time Warner Inc.

David Ho is a New York correspondent for Cox Newspapers.