Homestore Board Member Resigns

In another sign of eroding investor confidence in Homestore.com, the chairman and chief executive of Cendant Corp.’s real estate unit resigned Tuesday from the board of the struggling Westlake Village Internet company.

Cendant, Homestore’s biggest shareholder, is the franchiser of Coldwell Banker, Century 21 and ERA residential brokers. The New York-based company owns an 18.5% stake in Homestore, or about 14 million shares, which it acquired when it sold its Move.com division to Homestore in February 2001 for $575 million. Cendant wrote down the value of its Homestore holdings to zero last month.

Richard Smith’s departure reduces the number of Homestore directors to seven and, analysts say, signals a lack of confidence in Homestore’s ability to right itself amid a host of problems, including nearly 20 lawsuits claiming the company and its former executives enriched themselves at the expense of other shareholders.

“This doesn’t send a good message to Homestore’s investors,” said Safa Rashtchy, a U.S. Bancorp Piper Jaffray analyst. “Smith’s move is symbolic that Homestore has problems that Cendant doesn’t want to be associated with.”

Homestore and Cendant declined to comment.

Shares of Homestore tumbled 54% in November after the company announced that its projected 2002 revenue would fail to meet analysts’ estimates. Shares fell 2 cents Tuesday to $1.14, down from a 52-week high of $36.48 in July. Nasdaq is threatening to delist the stock.

Homestore, the leading home-sale listings provider on the Web, announced in December that its board was looking into its accounting practices. The company later said that it overstated revenue by as much as $45million during 2000 and as much as $113 million in the first three quarters of 2001. The inquiry led to the resignation of Chief Executive Stuart Wolff.