UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 of 15(d) of the Securities Exchange Act of 1934

Date of report (Date of earliest event reported): October 10, 2006

CNET Networks, Inc.

(Exact name of registrant as specified in its charter)

Delaware

(State or Other Jurisdiction of Incorporation)

 

0-20939   13-3696170
(Commission File Number)   (IRS Employer Identification Number)

235 Second Street

San Francisco, CA 94105

(Address of principal executive offices including zip code)

(415) 344-2000

(Registrant’s telephone number, including area code)

 


Check the appropriate box below if the Form 8-K is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 



Item 2.02 Results of Operations and Financial Condition.

On October 11, 2006, CNET Networks, Inc. (“CNET” or the “Company”) announced via press release CNET’s preliminary revenue results for its third quarter ended September 30, 2006. A copy of CNET’s press release is attached hereto as exhibit 99.1 and is incorporated into this Item 2.02 by reference.

The information in this Item 2.02 of this Current Report is being furnished and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

 

Item 5.02 Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers.

On October 10, 2006, Shelby Bonnie resigned from his positions as Chairman of the Board and Chief Executive Officer of the Company. The Board of Directors of the Company named Neil Ashe as its Chief Executive Officer and as a Class I director. Mr. Bonnie will continue to serve as a director. Mr. Ashe’s appointment to the Board of Directors as a Class I director is to fill the vacancy created by the Board of Directors expanding its membership from six to seven directors.

Mr. Ashe, 38, joined the Company in 2002 and has most recently been serving as its Executive Vice President, overseeing the Company’s Community, Business, International and Channel divisions as well as Corporate Strategy and Development. Prior to joining CNET Networks, Mr. Ashe founded and served as chief executive officer of several start-up companies and held senior positions in private equity and investment banking. Mr. Ashe holds an MBA from Harvard Business School and a BS from Georgetown University.

A copy of the Company’s press release relating to the foregoing is attached hereto as Exhibit 99.2 and incorporated into this Item 5.02 by reference.

 

Item 8.01 Other Events.

On October 10, 2006, the Special Committee of the Company’s Board of Directors reported the Committee’s findings on the Company’s option granting practices and procedures to the Company’s Board of Directors. A copy of the press release issued by the Company in connection with the Special Committee’s report is attached hereto as Exhibit 99.3 and is incorporated into this Item 8.01 by reference.

On October 11, 2006, CNET also announced that it has modified and extended its solicitation of consents for its outstanding $125.0 million principal amount of 0.75% Senior Convertible Notes due 2024 to offer holders a two-year extension of the call protection period so that such period would end on April 20, 2011 rather than April 20, 2009. The offer, which was scheduled to expire midnight, New York City time, on October 11, 2006, will now expire at midnight, New York City time, on Wednesday, October 18, 2006. The


solicitation is being made upon the terms, and is subject to the conditions, set forth in the Company’s Consent Solicitation Statement, dated September 13, 2006, and in the accompanying form of consent, as amended by the supplement to Consent Solicitation Statement dated October 11, 2006. The proposed amendments and waivers require the consent of holders of 70% of aggregate principal amount of the notes outstanding. A copy of the press release announcing the modification and extension of the consent solicitation is attached hereto as Exhibit 99.1 and is incorporated into this Item 8.01 by reference.

 

Item 9.01 Financial Statements and Exhibits.

 

(d) Exhibits

 

99.1    Press Release, dated October 11, 2006, announcing Modification and Extension of Solicitation of Consents from Holders of 0.75% Senior Convertible Notes Due 2024 and Update of 3rd Quarter and Full Year Outlook
99.2    Press Release, dated October 11, 2006, announcing Appointment of Neil Ashe as New Chief Executive Officer and Director
99.3    Press Release, dated October 11, 2006, announcing Special Committee Findings and Recommendations of Stock Options Investigation


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Dated: October 11, 2006

 

CNET Networks, Inc.
By:  

/s/ George Mazzotta

Name:

 

George Mazzotta

Title:

 

Chief Financial Officer


EXHIBIT INDEX

 

Exhibit No.   

Description

99.1    Press Release, dated October 11, 2006, announcing Modification and Extension of Solicitation of Consents from Holders of 0.75% Senior Convertible Notes Due 2024 and Update of 3rd Quarter and Full Year Outlook
99.2    Press Release, dated October 11, 2006, announcing Appointment of Neil Ashe as New Chief Executive Officer and Director
99.3    Press Release, dated October 11, 2006, announcing Special Committee Findings and Recommendations of Stock Options Investigation

EXHIBIT 99.1

CNET NETWORKS, INC. MODIFIES AND EXTENDS

SOLICITATION OF CONSENTS FROM HOLDERS

OF 0.75% SENIOR CONVERTIBLE NOTES DUE 2024

COMPANY UPDATES 3rd QUARTER AND FULL YEAR OUTLOOK

Company to Hold Teleconference on October 23, 2006 to Discuss

Third Quarter Revenues and Cash Position

SAN FRANCISCO — Oct. 11, 2006—CNET Networks, Inc. (NASDAQ:CNET) announced today that it has modified and extended its solicitation of consents for its outstanding $125.0 million principal amount of 0.75% Senior Convertible Notes due 2024. The Company also updated its outlook for it revenues for the third quarter of 2006 and for the full year.

Modified and Extended Consent Offering

The consent solicitation has been modified to offer holders a two-year extension of the call protection period so that such period would end on April 20, 2011 rather than April 20, 2009. The offer, which was scheduled to expire midnight, New York City time, on October 11, 2006, will now expire at midnight, New York City time, on Wednesday, October 18, 2006. The solicitation is being made upon the terms, and is subject to the conditions, set forth in the Company’s Consent Solicitation Statement, dated September 13, 2006, and in the accompanying form of consent, as amended by the supplement to Consent Solicitation Statement dated October 11, 2006. The proposed amendments and waivers require the consent of holders of 70% of aggregate principal amount of the notes outstanding.

The Company will give five days prior notice by press release of its intention to file any delinquent reports with the Securities and Exchange Commission, provided that the obligation to provide any such notice will cease upon the expiration or termination of the Consent Solicitation.

Requests for additional copies of the Consent Solicitation Statement, the Letter of Consent or other related documents should be directed to D.F. King & Co., Inc., the information and tabulation agent, at (800) 829-6551 (toll-free) or (212) 269-5550 (collect). Questions regarding the consent solicitation should be directed to the Convertibles Sales Department of Banc of America Securities LLC, the solicitation agent, at 800-654-1666 (toll-free) or 212-583-8206 (collect).

This announcement is not a solicitation of consents with respect to any securities. The consent solicitation is being made solely by the Consent Solicitation Statement dated September 13, 2006, as amended by the Supplement dated October 11, 2006.

Business Outlook

In April 2006 the Company revised its outlook noting several industry trends in the technology and video game industries. These factors continue to impact CNET Networks’ business, and accordingly, the Company has further revised its outlook.

 

    For the third quarter of 2006, CNET Networks estimates total revenues were approximately $92.8 million. Previously, the Company had expected total revenues of $93 million to $96 million.

 

    For the full-year 2006, CNET Networks expects total revenues of $376 million to $386 million. Previously, the Company had expected full year total revenues of $386 million to $403 million.


The Company will not be in a position to file its Quarterly Report on Form 10-Q for the quarter ended September 30, 2006 on a timely basis, pending the completion of its financial restatements related to its independent investigation of stock option granting practices and of the requisite audit procedures by the Company’s independent registered public accountants. Consequently, CNET Networks is not in a position to provide actual results or guidance regarding operating expense, operating income, net income or earnings per share.

The Company said that it expects to release its revenue results for the third-quarter ended September 30, 2006 and cash position, on Monday, October 23, 2006. The Company will hold its quarterly conference call to discuss third-quarter revenue results on Monday, October 23, 2006 at 5:00 p.m. ET (2:00 p.m. PT). To listen to the discussion, please visit http://ir.cnetnetworks.com and click on the link provided for the webcast conference call or dial (800) 344-1035 (international dial-in: (706) 679-3076). A replay of the call will be available either through an archived webcast at http://ir.cnetnetworks.com or telephone by dialing (800) 642-1687 (international: (706) 645-9291) and entering the conference ID number 7747781.

(The Company issued a separate release today reporting findings of the Special Committee of its Board of Directors on the Company’s options granting practices and procedures. In addition, the Company also issued a press release today announcing Neil Ashe’s appointment as CEO.)

This Business Outlook section contains forward-looking statements concerning the Company’s expected revenues for the third quarter of 2006 and the full year and its expected restatement of its historical financials statements. There can be no assurance concerning the Company’s actual third quarter or full year revenues or the outcome or timing of the restatement of CNET Networks’ historical financial statements. Important factors that could cause actual revenue results to differ materially include: a lack of growth or a decrease in marketing spending on the Internet due to failure of marketers to adopt the Internet as an advertising medium at the rate that we currently anticipate; a lack of growth or decrease in marketing spending on CNET Networks’ properties in particular, which could be prompted by competition from other media outlets, both on and off the Internet, dissatisfaction with CNET Networks’ services, or economic difficulties in our clients’ businesses; economic conditions such as weakness in corporate or consumer spending, which could prompt a reduction in overall advertising expenditures or expenditures specifically on our properties; the failure of existing advertisers to meet or renew their advertising commitments as we anticipate, which would cause us to not meet our financial projections; the failure to attract advertisers outside of our traditional technology and consumer electronics categories, which would cause us to not meet our financial projections; a continued decline in revenues from our print publications as advertising dollars shift to other media; and general risks associated with our business. The outcome and timing of the restatement may be impacted by actions that may be taken or required as a result of the investigation concerning matters relating to CNET Networks’ stock option grants. Forward-looking statements are made as of the date of this press release and, except as required by law, the Company does not undertake an obligation to update its forward-looking statements to reflect future events or circumstances.

About CNET Networks, Inc.

CNET Networks, Inc. (Nasdaq: CNET, www.cnetnetworks.com) is an interactive media company that builds brands for people and the things they are passionate about, such as gaming, music, entertainment, technology, business, food, and parenting. The Company’s leading brands include CNET, GameSpot, TV.com, MP3.com, Webshots, CHOW, ZDNet and TechRepublic. Founded in 1993, CNET Networks has a strong presence in the US, Asia and Europe.

CONTACT:

Sarah Cain (Media)

415-344-2218

sarah.cain@cnet.com

Cammeron McLaughlin

415-344-2844

cammeron.mclaughlin@cnet.com

EXHIBIT 99.2

CNET NETWORKS NAMES NEIL ASHE AS

NEW CHIEF EXECUTIVE OFFICER AND DIRECTOR

Jarl Mohn Named Chairman of the Board

SAN FRANCISCO – October 11, 2006 — CNET Networks, Inc. (Nasdaq:CNET) (www.cnetnetworks.com) today announced that its Board of Directors has unanimously appointed Neil Ashe as the Company’s new chief executive officer and director effective immediately. Co-founder and chief executive officer Shelby Bonnie has resigned as chairman and CEO.

The Company also announced today that Jarl Mohn has been named non-executive chairman of CNET Networks’ Board of Directors. Mr. Mohn has extensive experience in the media and technology industries. He has previously served as president and chief executive officer of Liberty Digital, Inc., founding president and CEO of E! Entertainment Television, and executive vice president and general manager of MTV and VH1.

“CNET Networks is known for building world class brands for people and the things they are passionate about. It’s been an honor to work with Shelby as we have grown the company from its technology roots and moved into new categories like Entertainment, Food and Parenting,” said Neil Ashe. ”CNET Networks is a different kind of media company and we are committed to continuing to be pioneers in interactive content. We have been and will be innovators, and together with my colleagues worldwide, I am confident about what we can accomplish. Innovation is part of our DNA and will be fundamental to our success moving forward.”

Jarl Mohn, the newly appointed chairman of the Board, said, “Neil has been instrumental in CNET Networks’ growth and success over the past few years both as head of corporate strategy and development and through the operation of several business units. This announcement marks the successful completion of the Board’s succession planning started more than 18 months ago. Neil’s broad-based expertise in all facets of the business, together with his outstanding management and leadership skills, are valuable assets that will serve our company well as we continue to expand CNET Networks.”

“I am confident under Neil’s leadership CNET Networks will continue to play an important role in the evolving media landscape” said Shelby Bonnie. “He will build upon the company’s legacy and take it to new heights.”

Since joining CNET Networks in 2002, Mr. Ashe has led the company’s content expansion strategy, including numerous acquisitions to develop its existing products and expand into new categories which attract new audience and customer segments. His day-to-day responsibility for the Community and Lifestyle, International, Channel, and Business divisions has resulted in new product development, audience growth and revenue streams for the company.

Prior to joining CNET Networks, Mr. Ashe founded and served as chief executive officer of several start-up companies and held senior positions in private equity and investment banking. Mr. Ashe holds an MBA from Harvard Business School and a BS from Georgetown University.

(The Company issued a separate release today with findings of the Special Committee of its Board of Directors on the Company’s options granting practices and procedures to the Board of Directors. In addition, the Company also issued a press release today announcing that it has modified and extended its solicitation of consents from holders of its 0.75% Senior Convertible Notes due 2024 and updated its third quarter and full year guidance.)


About CNET Networks, Inc.

CNET Networks, Inc. (Nasdaq: CNET, www.cnetnetworks.com) is an interactive media company that builds brands for people and the things they are passionate about, such as gaming, music, entertainment, technology, business, food, and parenting. The company’s leading brands include CNET, GameSpot, TV.com, MP3.com, Webshots, CHOW, ZDNet and TechRepublic. Founded in 1993, CNET Networks has a strong presence in the US, Asia and Europe.

Contact

Sarah Cain (Media)

415-344-2218

sarah.cain@cnet.com

Cammeron McLaughlin, Investor Relations

415.344.2844

cammeron.mclaughlin@cnet.com

EXHIBIT 99.3

CNET NETWORKS SPECIAL COMMITTEE REPORTS FINDINGS

AND RECOMMENDATIONS OF STOCK OPTIONS INVESTIGATION

SAN FRANCISCO – October 11, 2006 — CNET Networks, Inc. (Nasdaq:CNET) (www.cnetnetworks.com) today announced that a special committee of its board of directors (the “Special Committee”) has reported its findings on the Company’s options granting practices and procedures to the Board of Directors.

As previously announced, on May 22, 2006 the Special Committee was established by CNET Networks’ Board of Directors to conduct an independent investigation relating to past option grants, the timing of such grants and related accounting matters. The Special Committee consists of two independent members of CNET Networks’ audit committee of the Board of Directors — Peter Currie and Betsey Nelson, chair of the audit committee. The Special Committee was assisted in the investigation by outside legal counsel Davis Polk & Wardwell and accountants from Navigant LLC. The Special Committee reviewed and analyzed more than 700,000 documents and emails, and conducted over thirty interviews of current and former officers, directors, employees and advisors to CNET Networks over the last four months. As previously announced, the Special Committee and the Company continue to cooperate with the Securities and Exchange Commission, the NASD and the United States Attorney’s Office for the Northern District of California.

“The completion of the Special Committee report represents an important step forward for CNET Networks,” said Neil Ashe, the Company’s newly elected chief executive officer. “We are committed to ensuring that the highest standards of business conduct, financial reporting and internal controls are maintained, and we are focused on quickly implementing the recommendations of the Special Committee. Under the leadership of our CFO, George Mazzotta, we look to complete the restatement of historical financial statements related to past stock option grants as soon as practicable.”

Key findings of the Special Committee’s report include:

 

    There were deficiencies with the process by which options were granted at CNET, including in some instances the backdating of option grants, during the period from the Company’s IPO in 1996 through at least 2003.

 

    These deficiencies resulted in accounting errors, which the Company has previously announced will result in a restatement.

 

    A number of executives of the Company, including the former CFO and the recently resigned CEO, General Counsel and SVP of Human Resources, bear varying degrees of responsibility for these deficiencies.

 

    The report does not conclude that any current employees of the Company or any recently resigned employees engaged in intentional wrongdoing.

 

    Since 2003, the Company has taken steps to remedy these deficiencies through personnel changes and improved internal controls. The Special Committee recommended a number of additional remedial measures.

 

    The recently resigned executives and the directors who received improperly priced options have agreed voluntarily to have these options repriced to fair market value on the appropriate measurement date.

The Special Committee reported that it believes that the Compensation Committee relied upon management to establish and maintain appropriate procedures with respect to stock option grants. The report stated that it would have been better practice if the Compensation Committee had encouraged management to adopt more rigorous procedures and controls during the 1996-2003 period.


In a separate press release also issued today, the Company also announced that Shelby Bonnie, CNET’s co-founder and the company’s chairman of the board and chief executive officer from 2000 to the present, has resigned as chairman and CEO. He will remain a director. The Company’s general counsel and head of Human Resources have also resigned.

With regard to Mr. Bonnie, Mr. Jarl Mohn, chairman of the Board of Directors, commented, “We extend our appreciation to Shelby for his founding role and many years of service, and for his willingness to work with the Board and the Company in assisting with this transition. Shelby’s lasting legacy will be the innumerable positive actions he undertook to make CNET Networks the successful industry leader it is today.”

“I apologize for the option-related problems that happened under my leadership,” said Shelby Bonnie. “I believe that the company has come a long way since 2003 in addressing these deficiencies, but am deeply disappointed it happened nonetheless.”

The Company and its independent auditors are reviewing the findings of the Special Committee investigation. Management continues to expect that CNET Networks will need to restate its historical financial statements to record non-cash charges for compensation expense relating to past stock option grants. The Company and its independent auditors are reviewing recent accounting guidance published by the SEC, and have not yet determined the amount of such charges, the resulting tax and accounting impact, or which periods may require restatement.

(The Company issued a separate release today announcing Neil Ashe’s appointment as CEO. In addition, the Company also issued a press release today announcing that it has modified and extended its solicitation of consents from holders of its 0.75% Senior Convertible Notes due 2024 and updated its third quarter and full year guidance.)

# # #

About CNET Networks, Inc.

CNET Networks, Inc. (Nasdaq: CNET, www.cnetnetworks.com) is an interactive media company that builds brands for people and the things they are passionate about, such as gaming, music, entertainment, technology, business, food, and parenting. The Company’s leading brands include CNET, GameSpot, TV.com, MP3.com, Webshots, CHOW, ZDNet and TechRepublic. Founded in 1993, CNET Networks has a strong presence in the US, Asia and Europe.

Contact

Sarah Cain (Media)

415-344-2218

Sarah.cain@cnet.com

Cammeron McLaughlin (Investor Relations)

415.344.2844

cammeron.mclaughlin@cnet.com