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Will Bush Win Lift Antitrust Cloud Over Homestore.com?

Maybe the issue will be moot after Tuesday's presidential election is over, but until it's clear that Homestore.com is no longer the target of a Justice Department antitrust investigation, dont count on much upward movement for shares of the leading online real estate services Web site.

While the probe has been going on for about six months, it shifted into high gear last week in the wake of Homestore.com's announcement on Oct. 27 that it has agreed to buy real estate portal Move.com from Cendant Corp. in a $761 million stock deal.

The planned purchase helped the market forget the federal investigation, as HOMS shares reversed a choppy six-week ticker slide, soaring 31% by day's end to close at $37.94.

Not surprisingly, it had the opposite effect on antitrust regulators, who immediately issued a new batch of civil subpoenas to Homestore.com competitors such as HomeSeekers.com and Microsoft's HomeAdvisor.com.

HOMS shares were down nearly 5% to $37.25 by early Tuesday afternoon after the Wall Street Journal reported this latest development.

Founded in 1993 as InfoTouch, Homestore.com initially intended to develop public kiosks to allow people to search for home listings. Three years later it switched its name to NetSelect and opened Realtor.com, the most popular househunting site on the Internet.

Since then Homestore.com has added to its stable of Web properties and built its share of homes listed on the 'Net to 90%, a number that has drawn interest from investors and investigators alike.

The company has made financial progress as well. Last month it reported pro forma net income for the third quarter of $554,000, or 1 cent per share, compared to a net loss of $16.8 million, or 25 cents per share, in the year-ago quarter. Revenues increased 201% to $62.2 million.

But Homestore.com's accumulated deficit now tops more than $220 million, and in addition to the ongoing Justice Department probe, it faces another potential risk: The company has built its market lead in large part through an exclusive agreement with the National Association of Realtors. If the NAR terminates the agreement, HOMS would have to turn over control of its flagship Realtor.com site to the association.

It's a good bet that a Bush administration would remove the antitrust cloud hanging over Homestore.com's head. Even if the GOP nominee wins, however, it may be months before we know for sure. Combined with the red ink and NAR situation, HOMS makes for a shaky bet these days.



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