After weeks of turbulent news capped by the announcement that revenues may have been overstated by as much as $95 million in a nine-month period, Homestore is making a fresh start.
In his first day on the job, W. Michael Long, Homestore's new chief executive officer, told Real Estate-Realtor Times in an exclusive interview that the company must deliver more value for realty professionals, re-focus, and get costs and revenues in line.
One key, said Long, is to improve the value obtained by real estate professionals.
"We know that it costs about $400 to generate a buyer," said Long. "Based on my analysis of the company we can beat that number. If we're able to deliver customers at a lower cost, the value of the national franchise that has been constructed here over the past five years is going to be significantly more valuable in the future than it is today."
The company, however, faces financial hurdles. Homestore, according to information filed November 19th with the Securities and Exchange Commission, has experienced net losses in each quarterly and annual period since 1993. As of September 30, 2001, the firm told the SEC it had an accumulated deficit of $516.7 million.
"We can talk about GAAP and net income relative to profitability. I think that in a situation like this, as is true with other companies in this market, large and small companies, Internet and non-Internet companies, the focus is generating positive cashflow and strengthening the balance sheet."
"We at the company need to be self-financing. That means living within our means and that's what we intend to do on a go-forward basis is to increase revenues and control expenses, so that we can pay our own way."
"The capital markets have changed indefinitely, so we're not going to look outside to finance our company on a go-forward basis. So positive cashflow you can assume is a near-term priority for the operation."
But can the company survive, given continuing operating losses?
"That's been carefully looked at and I'm quite optimistic about the company having sufficient capital resources to execute its business plan," said Long.
In addition, said Long, the company has two other priorities:
- Making customers more aware of the value they get from Homestore, which means paying more attention to real estate professionals.
- Keeping quality employees.
"If you had to take just three things we're going to do well, those are the three things," he explained.
Long said the company had gotten away from its core direction.
"The company, based on my early observation, was probably focused in too many different areas.
"That's not uncommon," he continued. "That's what happened to companies that came out of the Internet boom, they diversified in too many areas within their respective markets and it's difficult to do everything for everyone in a market well."
The goal, said Long, is "re-focusing the company on its fundamental value proposition." And that value proposition can be shown by "leveraging the Internet to deliver qualified customers to real estate professionals."
Homestore is the market leader, Long explained.
"What it needs is stronger focus on its core customer set and my goal is to bring that focus."
In a filing with the SEC, Homestore announced last year that it's seeking arbitration to resolve differences with its major distribution partner, AOL.
Will the dispute continue?
"We're not interested in a war with AOL," said Long. Instead, he hopes to work out a better arrangement.
"AOL is a major player in the Internet space," Long said. "And the company's preference and my preference would be to have a positive, productive strategic relationship with AOL. And that's the attitude I bring to the table.
"However, the company's interests have to be protected here. And so we will defend the company's interests and protect its assets against all comers. So the attitude is that I hope to engage AOL and other partners of the company very quickly to hopefully reach compromises that are hopefully in each other's best interest."