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CNET Networks has $250 million burning a hole in its pocket. The Internet media company secured a line of credit for that amount on October 16, even though it already had $60 million in cash (this for a company with estimated annual revenues of $418 million). So what is it going to do with all that cash? We may find out later today during its third quarter earnings call, but a good bet is that a stock buyback is in the works.

CNET’s stock has gone nowhere the past few years. And its current market capitalization of $1.2 billion is close enough to its enterprise value of $1 billion to get private equity funds and hedge funds sniffing around. (It is also dangerously close to the total value of its assets which, according to Oppenheimer $ Co. analyst Sandeep Aggarwal, are worth $674 million). CNET is under the same takeover pressures as larger print media companies like Dow Jones (bought for $5 billion by News Corp.) and the Tribune Co. (bought for $8 billion by Sam Zell).

If a stock buyback manages to jack up the market cap, a takeover could be averted. With only 152 million shares outstanding, CNET could buy up 20 percent of its shares with that $250 million, assuming it could buy them all at today’s stock price of $8. (I offer this back-of-the-envelope calculation just as a reference point—obviously, a buyback would have a major impact on the price). Although, whether that is the best use of its cash, is another question entirely.

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Source: TechCrunch
Original Article: http://feeds.feedburner.com/~r/Techcrunch/~3/174953602/