Once thriving Homestore falls on hard times. By BUILDER Magazine Staff
Last June, Alan Merrill was saying there were only three numbers that mattered when it came to talking about Homestore.com: "We have $500 million in revenues, $400 million in cash on hand, and a market capitalization of $3 billion. When I bring that up to investors, concern about Homestore evaporates."
That was then. Now Merrill is thankful just to have his job. On Jan. 2, Westlake Village, Calif.-based Homestore announced it had overstated its online advertising revenues in the first three quarters of last year by $54-$95 million. The admission indicates the magnitude of the company's bookkeeping problems. A former Wall Street investment banker, Merrill reported the problems after investigating the company's finances. He tells BUILDER that Homestore is "a wiser company, and it is now worth about $350 million, has about $150 million in cash, and earns about $400 million annually."
Having parted ways with CEO Stuart Wolff, Homestore on Jan. 7 announced a shake-up of its top executives. The company's new management team includes board chairman, Joe Hanaue, CEO W. Michael Long, COO Jack D. Dennison, and CFO Lewis R. Belote III. Long, Dennison, and Belote, all worked previously for WebMD.
Homestore continues to stumble after its accounting practices were called into question. Now many dot-com industry representatives believe it will ultimately fail unless management makes more draconian staff reductions to survive.
After announcing the executive changes, Homestore shares fell 90 cents, or 25 percent, to $2.70, well below its 52-week high of $37. The company, which until recently was regarded as one of the most promising dot-coms, surprised investors late last year by announcing a decline in its advertising revenue, which caused it to restate revenues for 2001 by as much as $95 million.