RealTime IT News

Homestore Woes Mount

The problems for Homestore just never seem to end, as witness reports that Cendant Corp. may be alleging that the online real estate play breached an acquisition agreement when it overstated its revenues for the year 2000.

Homestore purchased Move.com from Cendant in an all-stock deal valued in October of 2000 at $761 million. However, Homestore gave certain warranties about the accuracy of its financial statements.

Homestore disclosed the matter but did not elaborate in a filing with the Securities and Exchange Commission.

Problems developed when after the sale (at $31 a share the day it was announced), Homestore's stock began to tank. Now, Cendant apparently wants to renegotiate the terms of the deal -- after reportedly writing down the sale proceeds to zero.

The Wall Street Journal, citing souces, said that Cendant wants all of the restrictions in the acquisition agreement dropped, including clauses governing when it can sell the Homestore shares it received in the deal, and where it can place home listings from its residential brokerage brands -- Coldwell Banker, Century 21 and ERA.

Homestore.com's Realtor.com site got exclusive 40-year access to the listings of Cendant's Century 21, Coldwell Banker and ERA real estate franchises as part of the deal.

Westlake Village, Calif.-based Homestore, whose stock is still below $1 a share, managed to cut its second-2002 loss despite reduced revenues as it continues to restructure following an accounting scandal over the recording of ad revenues.

Homestore racked up staggering losses after overstating ad revenue for 2000 and for three quarters in 2001 and has been rebuilding and restructuring ever since.

The discussions with Cendant come as Homestore also faces a new lawsuit filed by the California State Teachers' Retirement System accusing Homestore of padding revenues through complicated third-party transactions with America Online .

Homestore's network of Web sites includes the flagship Realtor.com; HomeBuilder.com; Homestore Apartments & Rentals; and Homestore.com, a home information resource. Other Homestore advertising divisions are Homestore Plans & Publications and Welcome Wagon.