RealTime IT News

Homestore Still Struggling

Recovering Internet real estate operation Homestore managed to cut its second-quarter loss despite reduced revenues as it continues to restructure following an accounting scandal over the recording of ad revenues.

The Westlake Village, Calif.-based company , whose stock is below $1 a share, said revenues were down 15 percent year-over-year at $65.9 million for the second quarter.

The loss was $52.3 million or 44 cents per share, compared to a loss of $120.9 million in the same period in 2001.

The online real estate play racked up staggering losses after overstating ad revenue for 2000 and for three quarters in 2001 and has been rebuilding and restructuring ever since.

Homestore said its second quarter results reflect a $23 million charge to its operating results for the settlement of a lawsuit filed by Memberworks over Homestore's purchase of ConsumerInfo's former parent company, iPlace Inc.

The results for the second quarter also include a gain from discontinued operations of $10.2 million from the sale of the company's ConsumerInfo division, which was sold to U.K.-based business software company Experian on April 2.

A federal judge ruled in March that the sale could go through.

Homestore bought ConsumerInfo.com from iPlace in August 2001. However, court action came from Stamford, Conn.-based membership services company MemberWorks which had been the majority owner of iPlace.

MemberWorks said that a substantial portion of the purchase price from Homestore was paid in the form of Homestore common stock, valued in the merger agreement at approximately $22 per share, or a total of $36 million. However, the stock declined to about $2 after the scandal broke.

As part of the settlement agreement, Homestore will receive $35 million in cash from sale proceeds and Memberworks and certain other former iPlace shareholders will receive $23 million as settlement of claims. A judge had ordered that $58 million of the $130 million in proceeds from the sale of ConsumerInfo.com should be placed in a trust.

As for Homestore's future results, CEO Mike Long said the company expects to achieve operating positive cash flow by December, but he would not be more specific on guidance.

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.