Dissident investors seek sway over CNet

A group of dissident investors is vying to seize control of CNet Networks Inc.’s board, trying to shake up the online technology news and entertainment company, according to a filing Monday to the Securities and Exchange Commission.

San Francisco-based CNet vowed to fend off the uprising, which it characterized as a violation of company rules designed to prevent short-term investors from gaining control of the board without providing a payoff for other shareholders.

Led by New York-based Jana Partners, the mutinous investors hope to replace two of CNet’s current directors while gaining shareholder approval to expand the board to 13 members from eight. Jana and its allies believe they could get five more directors elected to control seven of the 13 seats.

Jana will need the backing of other shareholders to pull off its coup. The group, which includes venture capital firm Spark Capital, controls about 16% of CNet.

Investors have long been frustrated with CNet because its profit hasn’t kept pace with the Internet ad boom, even though the company owns a stable of popular websites, including News.com, TV.com and Bnet.

In November, CNet’s family of sites attracted 130.6 million visitors worldwide, the ninth-largest Internet audience, according to ComScore Media Metrix. CNet’s revenue rose by just 7% to $289 million during the first nine months of 2007. Meanwhile, total U.S. online ad spending surged 26%, according to the Interactive Advertising Bureau.

CNet lost just under $26 million through that period, much larger than a $325,000 loss during the comparable period in 2006.

The lackluster performance has hurt CNet’s stock, which has sank by about 25% since 2004.