Homestore Recasts Management Team

Homestore.com Inc. Chairman and Chief Executive Stuart Wolff has resigned, less than one week after the largest Internet lister of homes for sale announced it had overstated revenue by as much as $95 million in the first nine months of 2001.

Wolff left to pursue a new technology venture, the company announced Monday. A new slate of officers has taken control of the 4-year-old Westlake Village business, which is reeling from a series of setbacks. Most recently, the company came under fire for using its own stock to pay operating expenses.

Also Monday, trading in the company’s stock resumed after being suspended since Dec. 21. The shares plunged as low as $1.24 but closed at $2.46, down $1.14, or 32%, on Nasdaq. The stock’s 52-week closing low of $2.28 was reached in early November.

Analysts lauded the restructuring of Homestore.com’s top management, but they expressed skepticism about the long-term prospects for the company, which until recently consistently outperformed industry expectations.

“Their success will depend on maintaining their present brand and on how well they keep this management team together,” said Kim Pillon, an analyst at Nielsen/NetRatings, an audience measurement service for the Internet.

The Internet real estate listing company, whose Web sites include Realtor.com, Homebuilder.com and Homestore.com, named board member Joe Hanauer as chairman and W. Michael Long, the former chairman of WebMD Inc., as chief executive, said Homestore spokesman Gary Gerdemann.

Jack D. Dennison, also formerly with WebMD, was named chief operating officer, and Lewis R. Belote III will serve as chief financial officer.

Company executives expressed confidence that they can regain credibility.

“There is skepticism out there, and I believe it’s justified,” Long said. “When we can demonstrate we can relate well to our customers, the confidence in our investors will return.”

The company is focusing on improving customer service, living within its means and retaining its employees, Long said. In October, the company slashed 700 jobs, about 20% of its work force.

The company’s troubles began months before the layoffs. In July, the Justice Department ended a probe into possible anti-competitive business practices by Homestore.com without taking action. The agency’s antitrust unit had been investigating the company’s business strategy, which includes exclusive contracts with many of the country’s largest residential property listing services.

In dual setbacks last month, Homestore disclosed that its board was investigating the company’s books and that Chief Financial Officer Joseph Shew had resigned because of personal reasons after less than a year in the position.

Three employees in Homestore.com’s finance and business development departments have been placed on administrative leave.

The company said last week that the $351 million in revenue it reported for the nine months ending Sept. 30 was $54 million to $95 million too high. An internal audit revealed that millions of dollars in online advertising transactions had been incorrectly reported as revenue. The transactions should have been accounted for as barter deals related to purchases of goods and services from third parties.

Trading in Homestore shares--priced at $80 two years ago--was halted last month after the company said it was investigating its accounting procedures. The company said Monday that it provided “additional information” to Nasdaq, and market officials allowed trading to resume at midday.

Homestore shares fell 80% in 2001.

Homestore.com was established more than four years ago and quickly secured more than 95% of the nation’s home listings, about 1.5 million entries. Its strength grew out of its relationship with the National Assn. of Realtors, the industry’s largest trade group. The company’s empire includes Web sites that provide listings for new and existing homes and apartments, as well as remodeling, financial and relocation information.

Homestore’s sites are among the most popular on the Internet, ranking 21st among all Internet destinations, according to Nielsen/Net- Ratings.

Although the company’s main business “appears sound,” the restructuring “may cause the company to bleed more cash than anticipated,” said Mark Rowen, a Prudential Financial analyst, in a research report last week.

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Bloomberg News was used in compiling this report.