There's news from Homestore, perhaps a hint that the company is down but not out.

Homestore says it will come up with revised financial statements for 2000 and 2001 by mid-March. You can bet that on the day such materials are released, a new industry will be born, one which looks at what was reported earlier, what was revised, and the difference between the two numbers. News groups and law firms will try to divine the meaning of it all and accounting professors will have new grist for university seminars.

There is one sentence in Homestore's February 13th announcement which has caught everyone's attention:

"The company stated that it expects its cash flow from operations to be positive for the full year 2002 and that it had cash and cash equivalents available to fund operations of approximately $48 million at December 31, 2001, in addition to restricted cash of approximately $100 million."

What does this sentence mean?

When last we left off, Homestore reported that for the period ending September 30th it had cash and cash equivalents of $71 million. Whether this number is correct is unknown, since Homestore has advised investors and presumably everyone else that they "should not rely upon the company's previously filed reports."

Barring revisions and restatements, and for purposes of discussion only, let's say that $71 million is a real number.

In the last quarter of 2001 Homestore started with $71 in cash and equivalents and ended with $48 million. That's a cash reduction of $23 million, or $7.66 million a month.

This sounds bad -- but "only" losing $7 or $8 million in cash a month may be an improvement when you look at reported past results. And if the company has $48 million on hand, then with declining costs it may have more time than many expected to turn around.

On March 31st, according to figures now being re-stated, the company had cash and cash equivalents of $284.1 million. On June 30th, this total was down to $175.6 million -- a reduction of $108.5 million, or $36.2 million a month. And, as we have seen, by the end of September Homestore had cash and cash equivalents of $71 million -- a drop of $104.6 million, or $34.9 million a month.

Does the news of February 13th hint that Homestore has stanched its cash losses?

In October, the company said it would drop 700 employees, lay-offs which will result both in misery for past workers as well as savings for the company. If you figure an average monthly savings of $5,000 per ex-worker, Homestore cut staff costs by $3.5 million a month.

Earlier this month, Homestore announced another reduction, this time 300 employees. Again, if a typical employee costs $5,000 a month, the firm will reduce expenses by $1.5 million.

In addition, Homestore has sold eNeighborhoods, though terms have not been disclosed.

Can it be that Homestore has significantly reduced monthly costs -- and that costs will fall further because of the 300 additional staff reductions? If the company is to survive in some shape or form, such cost reductions and asset sales are absolutely necessary.

Even with cost-cutting, Homestore still has big problems.

Ad revenues in the first three quarters of 2001 were overstated, says the company, by $54 to $95 million. Numbers for 2000 and 2001 will not be released until next month and no one knows what they might say. Revenues and expenses for this quarter won't be known for two months. Whether subscription income can be maintained is uncertain. All eyes, of course, will be watching advertising revenues and cashflow.

Is Homestore's latest news a glimmer of hope or a mirage? Not enough is known about Homestore at this time to suggest where the company is headed. But watch this space -- a better picture will emerge in the coming four to eight weeks.

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