CNET Selling to CBS

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How appropriate.  I am in San Francisco, the home of CNET.  In fact I walked by the CNET headquarters last night after having dinner with colleagues from   Seeing the CNET building made me think of my recent posts in which I suggested that Yahoo should buy CNET.   Interestingly I wrote that Yahoo should buy Dow Jones.  Dow Jones was sold soon after.  Now CNET.  I guess I can figure out who will be sold, but I have to work on the buyer part!?

I think this is a good purchase by CBS.  However is it not odd that a few years ago CBS sold Marketwatch to Dow Jones?  Think of the lineup CBS would have if they had retained Marketwatch, with Sportsline and CNET. This would be very powerful.  Too bad somebody blew the Marketwatch decision.  Perhaps the same person who now decided to buy CNET?

Quite a premium.  44% over the closing price of yesterday.  4x 2008 revenues and 22x 2008 EBITDA.  Based on where CNET has been headed and with the threat of a takeover, CNET has done well with this decision.  While the deal metrics are strong, I have long contended that content and traffic are extremely valuable.  These values are not always visible in the price of a stock.  It is nearly impossible to create a CNET today.  Therefore CBS wanted Internet girth and had to pay up.  Think of the recent Microsoft-Yahoo dance.

Microsoft would have to pay up too for Yahoo.  In order to get girth Microsoft should have paid the extra few dollars to Yahoo.  Microsoft cannot obtain that girth without a big payment.  Facebook has girth, but I still am a doubter that Facebook will ever be a money machine.  The other facet in the equation is the geometry of a deal.  In other words, does 2 plus 2 equal 6? 8? More?  The CBS + CNET deal yields 6.  The Microsoft + Yahoo deal yields 12.

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