Homestore, Still Dealing With Legal Woes, Posts a Loss
Homestore Inc. said Tuesday that its second-quarter loss narrowed and revenue rose, but the Internet’s largest provider of real estate listings warned that ongoing legal issues would continue to be a drag on the bottom line for at least the rest of the year.
The Westlake Village company reported a net loss of $4.3 million, or 3 cents a share, for the three months ended June 30. That compares with a loss of $91.7 million, or 78 cents, in the same period a year earlier. Revenue rose 5% to $56.8 million.
Homestore operates Realtor.com, a free multiple-listing service that generates revenue through advertising, for the National Assn. of Realtors; HomeBuilder.com for the National Assn. of Home Builders; and an online apartment listing service. It also sells software and other products to the real estate industry.
Chief Executive Michael Long said it was “unlikely” the company would be profitable this year, blaming higher-than-expected legal expenses related to the many “legacy issues” spawned by the company’s previous regime.
Those issues arose in 2001 when the then-highflying Internet company ran into trouble. Several of its executives and associates eventually were sued by the Securities and Exchange Commission, which accused them of inflating revenue by $160 million through fraudulent transactions. Last year, seven former employees and business partners of Homestore settled charges relating to those transactions. Four financial officers pleaded guilty to fraud.
The company has moved to settle various lawsuits stemming from the schemes. During the second quarter, Homestore recorded a litigation settlement charge of $2.2 million. That was down dramatically from a year earlier, when it took a $63.6-million charge for settling a shareholder lawsuit brought by the California State Teachers’ Retirement System.
Long said Tuesday that even though the court had approved Homestore’s settlement with the teachers’ pension fund, the pact was appealed during the second quarter and was still classified as “pending litigation.”
Excluding the legal and other charges, Homestore reported a loss of 2 cents a share, which missed the 1-cent-a-share loss expected by a consensus of analysts, according to Thomson First Call.
“I am encouraged by our progress and improving profitability,” Long said.
Homestore shares fell 10 cents to $3.40 in regular Nasdaq trading. The earnings were released after the markets closed.
