CNET Upside In Takeover Scenario

Some analysts are still bullish on CNET Networks, despite weakness in its core business and a stock-options backdating scandal…Barron’s blog picks up on one: Mark Mahaney, Internet analyst at Citigroup, reiterated his Buy rating.
His rationale:
1. CNET is maintaining its leadership in key online technology verticals.
2. 2007 will be an acceleration year for online technology due to the Vista and video game cycles.
3. With material leverage and a high fixed-cost model, CNET will likely experience material EPS growth acceleration in ’07.
4. CNET remains an attractive acquisition target, with historic M&A multiples implying 30% upside from today’s valuation.
Eric has doubts, and says “it feels like CNET is being nibbled away by a wide variety of blogs and other sites, like Engadget.com and Gizmodo. I’m also not convinced that CNET will get acquired any time soon”. Neither is Mahaney…he writes in the note: “We don’t have a specific acquirer in mind…Nor do we have a specific timetable in mind.”

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