CNET proxy fight sees opening salvo; mixed messages on A. Schulman proxy fight

By Evan Weinberger

New York, Jan. 7 - Is a proxy fight on the way for CNET Networks Inc.? That appears to be the case after hedge fund JANA Partners LLC and two other groups joined forces to put forth two candidates for the San Francisco-based internet media company's board of directors at the upcoming shareholders meeting.

JANA and its allies also want to expand the CNET board to 13 members from eight members.

JANA's allies include Paul Gardi, a managing partner at Alex Interactive Media, and venture capital firm Spark Capital.

Sandell Asset Management Corp. also signed on as a supporter of the move.

"This effort is about taking an underperforming company and increasing shareholder value by building on its top-notch editorial talent and premier internet assets," Barry Rosenstein, a managing partner at JANA, said in a statement. "Together with Paul Gardi and Spark Capital, we have assembled a group of nominees we believe has the technical skills and business experience to reverse CNET's ongoing underperformance and start delivering value for shareholders."

According to the JANA announcement, CNET stock only rose 1% in 2007 versus a 15% rise in CNET's benchmark comparison, the Interactive Week Internet Index. The Nasdaq rose a little over 10% for the year.

In the last three years, JANA goes on to say, CNET shares fell 19% versus a 32% gain in the Interactive Week Internet Index and a 22% rise in the Nasdaq.

JANA says that its slate of directors will help the company improve its core business of web sites providing consumer, technology and entertainment information and products; drive more traffic and improve ad serving; and improving return on investment.

JANA, Gardi of Alex Interactive and Spark, which control 8% of CNET's voting stock, have nominated Gardi and Santo Politi of Spark Capital for the CNET board. JANA controls an additional 8% of non-voting CNET stock while Sandell controls about 5% of non-voting CNET stock.

They have also nominated Jon Miller, a founding partner at Velocity Interactive Group and former chairman and chief executive officer of AOL; Jaynie Studenmund, former chief operating officer of Overture Services Inc. and Yahoo! and former president and COO of Paymybills.com; Julius Genachowski, managing partner at Rock Creek Ventures; Brian Weinstein of the Creative Artists Agency; and Giorgio Caputo, a JANA managing partner for the proposed five new board slots.

CNET management said the JANA-led bid went against the company's by-laws.

The company, which says it is the ninth-largest internet network, says it has begun reforming itself. That includes replacing much of upper management with new people and increasing the board by two seats.

"CNET Networks' board and management team have been and remain intensely focused on acting in the best interests of the company and creating value for all stockholders," the company said in a statement. "CNET Network's board of directors is comprised of eight directors, seven of whom are independent. The management team is fully supported by the board of directors in these efforts."

Investors were little moved by the CNET squabble.

CNET stock (Nasdaq: CNET) lost 12 cents, or 1.40%, to close at $8.44.

Equity markets were wishy-washy Monday. A skirmish in the Straights of Hormuz between the Iranian and United States navies prompted further worries on top of the credit concerns. But hope for another Federal Reserve rate cut at the end of the month kept those worries from trading the three major indices further down. There was a lot of up and down movement between fairly narrow ranges on all three.

The Dow Jones Industrial Average inched up 27.31 points, or 0.21%, to close at 12,827.49.

The Nasdaq slipped 5.19 points, or 0.21%, for a 2,499.46 close.

The Standard & Poor's 500 picked up 4.55 points, or 0.32%, to close at 1,416.18.

Mixed messages on A. Schulman

Stockholders looking for guidance on the A. Schulman Inc. proxy fight Monday didn't get any.

Ramius Capital Group, LLC is campaigning to have newly appointed A. Schulman CEO Joseph M. Gingo and another board member replaced by its candidates.

The vote is scheduled for Jan. 10.

PROXY Governance sided with Akron, Ohio-based A. Schulman's slate, saying "we believe that the reconstituted board, as well as CEO Gingo's approach to the company's current challenges, warrant shareholder support at this time."

The group went on to say, "We are concerned about the possible additional disruption that his [Mr. Gingo's] failure to gain re-election at the annual meeting could cause."

Institutional Shareholder Services endorsed the Ramius slate, however.

"We do not believe that the presence of the dissidents on the board would materially disrupt any ongoing restructuring process and/or strategic process," ISS said in a statement.

The monitoring agency criticized Gingo's recently announced 100-day plan, saying that many of the suggestions came directly from Ramius and that there are few if any metrics attached.

Finally, Glass Lewis split the difference and recommended investors vote for board members from both slates.

Ramius is the beneficial holder of 7.4% of the plastic resin and compound manufacturer's stock. The battle got nasty last week when Ramius released a letter trashing Gingo's 100-day improvement plan and his appointment as CEO.

A. Schulman stock (Nasdaq: SHLM) fell 95 cents, or 4.34%, to close at $20.94.

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