CBS-CNET Call: $1 Billion CBSI Revs In 2010-2011; Mid-Teen Revenue Growth


imageKicking off the conference call, CBS (NYSE: CBS) CEO Les Moonves touted the rare opportunity to purchase an internet company of this size and scale at a reasonable price. Unlike smaller internet hot shots, this one moves the needle: Moonves predicted that the combined CBS Interactive would have $1 billion in annual revenue by 2010-2010 with very attractive margins. And for strategy: “This absolutely fits with our strategy of having our content everywhere.” During the intro, he also noted that CBS was “thrilled” to have CNET (NSDQ: CNET) CEO Neil Ashe on the team. Said CFO Fred Reynolds: We expect the acquisition to produce an after-tax, internal rate of return of 13 percent using conservative growth and synergy assumptions… the acquisition is very affordable.” He added that CBS’s coverage ratio would actually improve after the acquisition, and that it would not have any impact on the current dividend, or the rate of dividend growth.

Ad platforms: “Number of different things in place… there are different systems in place in both companies, and we are going to take the best in class at both companies and combine them.” Earlier, Moonves mentioned that the CNET salesforce is one of the key assets in place.

Future acquisitions: CFO Fred Reynolds: “We’ve always been very prudent… having the scale of CNET allows us to bolt on other assets that might be attractive.” But don’t expect more deals on this size.

Proxy contest: As for what this means about Jana, Moonves avoided the question: “The board of directors at CNET is very excited about our deal”

Growth rate: CNET growing mid single digits. We are growing our revenue at 25-30 percent. So total: “Mid-teen revenue growth.” Profit growth may be a little higher.

CNET growth: CNET revenue of 406 million and EBITDA of 79 milllion for FY 2007 is expected to hit 450 million and 92 million respectively in 2008.

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