SportsLine, which will release its official quarterly report next week, said stronger-than-expected e-commerce revenue partially offset the ad sales decline.
"Although we continued to experience strong traffic over the summer, lower CPM [ad] rates and a lower than budgeted inventory sell-through rate affected advertising revenue during this period," said SportsLine CEO Michael Levy in a statement. "In addition, because the Web advertising market outside of the United States has not yet matured, strong traffic generated from our international sites did not result in a corresponding increase in advertising revenue."
SportsLine's stock, as low as 10 1/8 in early trading, fell 4 3/8 to 12 Tuesday. The Ft. Lauderdale, Fla.-based company went public last fall at 8.
The news sent shock waves through many stocks in the Internet sector, including top-tier companies like Yahoo! (YHOO) and AOL. SportsLine is the first pure-play online media company to warn that results would fall short of expectations.
But analyst Scott Ehrens, who downgraded SportsLine last week to "attractive" from a "buy," said much of the weakness is unjustified.
"The largest companies are getting a disproportionate share of the rewards and the small companies are challenged," he told CBS.MarketWatch.com. CBS Inc. (CBS), a half-owner of CBS.MarketWatch.com, owns a stake in SportsLine USA.
Ehrens said Yahoo's quarterly results, due out after the market closes Wednesday, should provide a boost for the sector.
The AOL pact will give SporsLine a continued presence on AOL's popular online service. SportsLine is paying more than $23 million in cash, stock and incentive-based warrants for the three-year agreement. The old 14-month deal (valued at an estimated $4 million) expired at the end of August, but SportsLine remained on the service as the companies negotiated for a renewal.
Written By Darren Chervitz