The West Lake Village, CA-based Homestore.com reported Thursday, Nov. 1 a third quarter net loss of $106.1 million or 96 cents per share, compared with a loss of $89.9 million or 87 cents per share during the same quarter last year.

The report said advertising revenues represented 24 percent of total revenues for the quarter or $28.5 million and that was a decline of 44 percent from the previous quarter.

Homestore.com shares closed at $4.99 Thursday, but by midday Friday sank to a 52-week low below $3 on the Nasdaq after Prudential Securities analyst Mark Rowen had reduced Homestore.com's price target from $7.50 to $8.50, down to $4 and Robertson Stephens cut its rating from "hold" to "sell". Shares sold at a high of $43 earlier this year.

Rowen, who earlier this year initiated coverage of Homestore.com with a "strong buy" rating and a 12-month price target of $32, told Reuters it could be some time before the company rebounded and it could find itself in a "cash crunch" by early next year.

Homestore.com offers an extensive online assortment of home buying, rental and home improvement content and services for home buyers, home sellers and real estate professionals and was considered the 800-pound gorilla among online real estate operations.

It is the online home of NAR's REALTOR.com and NAHB's HomeBuilder.com, among a host of other real estate Web sites.

All year, the real estate industry segment of the economy had helped keep a softening economy out of recession until October when both the National Association of Realtors (NAR) and the National Association of Homebuilders (NAHB) reported sales declines in September.

Real estate accounts for about 14 percent of the gross domestic product (GDP -- the measure of all the goods and services produced in the United States) and this week the U.S. Department of Commerce reported the GDP slipped by an estimated 0.4 percent during the third quarter, the sharpest decline in the GDP since the end of the 1990 to 1991 recession.

The decline signaled the end to the nation's longest economic expansion on record and didn't even include the economic effects of the terrorists attacks on September 11.

"In light of the changed business environment, we are taking the actions necessary to maintain our leadership position in the online real estate market," said Stuart Wolff, Homestore chairman and chief executive officer in an attempt to put the best light on dismal news. News of Homestore.com's losses come on the heels of a Homestore.com reorganizational house cleaning that swept out 700 employees to put in a new foundation comprised of three divisions -- a Real Estate Services Group to operate REALTOR.com, HomeBuilder.com, Homestore.com Apartments & Rentals and other real estate business units; a Retail and Consumer Services Group focusing on localized merchants, service professionals and consumer direct services; and a Corporate Development Group to handle mergers and acquisitions, business development, corporate partnerships and advertising sales.

Critics say acquisitions may be weighing down the online real estate giant which this year alone acquired iPlace, Inc., WyldFyre Technologies, NewList Corp., iPIX assets and Cendant's Move.com. In recent years it also gobbled up Homefair.com, NewList Corp., Top Producer Systems, Inc., Senior Alternatives for Living Web site and The Hessel Group.

The losses prompted the Reuter's headline "Homestore.com's Future Is in Question" in a story that said analysts were "dumbfounded" over how far the relatively stable business could have fallen so far so fast.

Just late last year the company announced net income cash profitability and was recently listed among Nielsen/NetRatings' 25 Top Web Sites, but a recent Reuters story questioned Homestore.com's accounting practices.

"I think maybe it should have been obvious to all of us that there is no way for a company like Homestore to sustain growth in advertising (when) every other company, from the biggest ones like Yahoo, all the way down to the very smallest, are seeing quarter after quarter of decline,'' U.S. Bancorp Piper Jaffray analyst Safa Rashtchy told Reuters.

Published: November 2, 2001

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