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RealTime IT News

Homestore in Cost-Cutting Mode

Online real estate play Homestore.com Inc., trying to battle back after suffering staggering losses in an accounting fiasco, has renegotiated the terms of its deal with a national Realtor's group to save itself a little money.

Westlake Village, Calif.-based Homestore , through its RealSelect subsidiary, operates REALTOR.com, the official Web site of the National Association of Realtors.

In its proxy statement filed recently with the Securities and Exchange Commission, Homestore said that the agreement had called for the company to "make quarterly royalty payments of up to 15 percent of RealSelect's operating revenue in the aggregate..."

The new agreement calls for a fixed payment to the Realtor group for 2002 of $1.175 million in two installments of $587,500 due on June 1, and Dec. 15. Next year the payment will be $1.3 million in four installments, and the schedule gradually increases through 2006.

Precisely how much will be saved is unclear but anything Homestore can do to save a buck or a couple of hundred thousand will help, as the company recently reported a 2001 loss of almost $1.5 billion and warned about the bills from its lawyers.

The accounting bills will be pretty hefty, also - the proxy statement reveals that for 2001, PricewaterhouseCoopers billed the company about $8.8 million for auditing and related services, and another $3.2 million for "other fees and tax matters."

Homestore ran into trouble when it began to account for bartered ads on a cash basis and was forced to disclose that it had overstated revenues by millions of dollars.

The company has said that in the first nine months of 2001, certain transactions resulting in the recognition of $81.6 million in revenue, were improperly recorded as cash transactions. The company also determined that in the same period, revenue from software products and services of $37.4 million did not meet all revenue recognition requirements. For the year 2000 $36.4 million in ad revenue had been improperly recorded as independent cash transactions.

Now, under new management, the company apparently wants to shed the dot com part of its name as well. A number of other Internet companies have moved to de-dot-com their names as well in the wake of the Internet recession.

Homestore's network of Web sites includes the flagship REALTOR.com; HomeBuilder.com; Homestore Apartments & Rentals; and Homestore.com, a home information resource.