As part of our Internet network, we provide shopping services primarily through Shopper.com and mySimon.com, which are designed to link buyers and sellers of products and services. We help businesses and individuals decide what products to buy by providing news, reviews, recommendations and detailed product specifications. We also help individuals decide where to buy products by providing real-time prices from competing vendors, merchant ratings, product availability and shipping costs, and by connecting the buyers and users with the sellers of technology and non-technology products.

Our shopping services are very efficient marketplaces, integrating product and price information from large online retailers, direct manufacturers and resellers.

We provide sales leads in exchange for a per-lead fee. During 2002, we delivered more than 104 million commerce leads to our merchant partners, or an average of 287,000 commerce leads per day.

We believe our innovative shopping services are valuable to individuals because they provide unbiased information and choice. These shopping services are valuable to merchants and advertisers because they provide a platform for creating brand awareness and generating sales leads. Finally, these services are valuable to us because the fees generated from sales leads are a diversified revenue stream that leverages the commerce-driven traffic on our site.

Computer Shopper magazine has been a leading source of technology information and commerce services for over 20 years. Computer Shopper has the highest number of readers per copy among all computer titles, and ranks number one in reader interest in advertising of any magazine measured by Mediamark Research, Inc. Dedicated to helping active buyers of technology products and services, Computer Shopper magazine is a trusted, in-depth reference for expert guidance on what to buy, where to buy, and how to buy technology products and services.

Internet

We are ranked as one of the most successful global companies in the Internet space according to Nielsen//NetRatings. We maintain a Web presence in 16 countries, including wholly owned operations in, Australia, France, Germany, Singapore, Japan and the United Kingdom, as well as a number of licensees around the world, and provide local language, original content relevant to our served markets. In aggregate, our international Web sites delivered approximately 2.6 billion total page views during 2002, which represented approximately 20% of CNET Networks' total, worldwide page views in the year ended December 31, 2002.

We operate five technology-oriented print publications in China, PC Magazine, eWeek, and Smart Partner (pursuant to a license from Ziff Davis Media) Computer Fan and GameSpot Magazine, with a combined circulation of approximately 350,000 per month. In Australia, we operate Technology and Business magazine with a monthly circulation of over 20,000, and CLevel Magazine with a monthly controlled circulation of 6,000. In Singapore, we publish CNETAsia Week with a bi-monthly circulation of 20,000, and CLevel Magazine with a monthly circulation of 6,000. In Germany, France and the UK, we publish ZDNet Week, which has a combined monthly circulation of over 70,000. In addition to online and print content, we also offer direct marketing services (CNET Direct), as well as technology events and production throughout Asia.

CNET Channel offers e-business solutions to IT manufacturers, distributors, resellers and portals worldwide, providing them with the content, data, infrastructures and services they need to conduct streamlined online commerce. As part of our Channel Services business, which reaches IT buyers and users in 40 markets, we derive revenue from data licensing agreements and a subscription-based online procurement platform.

CNET Channel's database contains over 1.2 million stock keeping units (SKUs) and related product images, descriptions and specifications. As of December 31, 2002, CNET Channel had 258 licenses for its data (a 50 percent increase from year-end 2001) with more than 140 U.S. and European online retailers, resellers, wholesale distributors and e-commerce content providers.

Our ChannelOnline online procurement platform is powered by our product catalog database, allowing customers to view and compare detailed product specifications, real-time pricing and availability from multiple distributors, procure products from suppliers, and connect to corporate customers through customized extranets. At the end of 2002, ChannelOnline was serving approximately 500 Value Added Resellers with over 2,000 unique users utilizing CNET's product procurement services.

These relationships position our Channel products as an integral link in the chain of business-to-business transactions between computer/technology resellers and wholesale distributors, and further solidify our role as the leading content provider for technology products for both business buyers and consumers.

As part of the transition provisions of Financial Accounting Standards Board Statement (SFAS) No. 142, "Goodwill and Other Intangible Assets", we reviewed for impairment all previously recognized intangible assets that have been determined to have indefinite useful lives. We completed our transition testing as of June 30, 2002. For the purpose of the SFAS 142 review, we have identified our reporting units as follows: U.S. Media (excluding Computer Shopper), Computer Shopper, Channel Services, Asia and Europe. In no instance did the carrying amount of a reporting unit exceed its fair value as of January 1, 2002, and therefore, we determined that there was no impairment resulting from these transitions tests.

We performed our annual goodwill and intangible asset impairment test as of August 31, 2002 in accordance with SFAS 142. The fair value of our reporting units was determined using a combination of the income and the market valuation approaches. The results of this annual impairment test indicated the carrying value of goodwill and other intangible assets for the U.S. Media reporting unit exceeded their implied fair values. An impairment charge of $238.8 million for goodwill and of $40.5 million for intangible assets of that reporting unit was recorded in the third quarter of 2002. Additionally, a loss on disposal of fixed assets of $11.2 million was recorded.

During 2002, we repurchased $59.2 million principal amount of our 5% Convertible Subordinated Notes due March 2006 for an aggregate purchase price of $36.7 million. These repurchases resulted in a gain of $21.6 million, net of the write-off of $0.9 million of related capitalized debt issuance costs. The Notes are convertible at the option of the note holder into our common stock after June 7, 1999 at a conversion price of $37.41 per share, subject to certain conditions. After these transactions, the remaining outstanding balance on these notes was reduced to $113.7 million.

We have invested approximately $14.9 million in the development of a standardized, global technology platform to deliver content and advertising, enable commerce and create universal data collection and registration systems. This investment is expected to simplify our operations and create a scalable infrastructure. We have transitioned the majority of our operations to the new platform and expect to complete the transition to the new platform in 2003. The creation of a standardized platform has enabled us to lower our operating costs.

We design our marketing activities to promote our multiple brands and to attract users, viewers and readers to our online network and print publications. Our marketing programs include Internet and print advertising campaigns, audience referral agreements with major Internet service providers, and participation in trade shows, conferences and speaking engagements. In 2002, we spent approximately $17.6 million (which includes approximately $9.9 million in barter expenses) to market our brands and services. We expect to continue to market our brands, products and services in the future.

Revenues from one customer, Gateway Inc., approximated 12% of total revenues for the year ended December 31, 2002. Of the revenues from this one customer, approximately 69% were generated from the creation of custom print publications for the customer. Approximately 12% of our accounts receivable balance at December 31, 2002 related to Gateway Inc. For each of the years ended December 31, 2001 and 2000, there were no customers that contributed more than 10% of our revenues. Our top one hundred advertisers contributed approximately 75% of our U.S. revenue in 2002.

We have wholly-owned operations in England, France, Germany, Switzerland, Singapore, Japan and Australia. In addition, we have an international presence through joint ventures in China and Korea. We also have license arrangements in various other countries throughout the world. Revenue is attributed to individual countries according to the international online property or print publication that generated the revenue. International revenues accounted for 17%, 14% and 4% of net revenues during the years ended December 31, 2002, 2001 and 2000, respectively. No single foreign country accounted for more than 10% of net revenues for the year ended December 31, 2002.

Competition among content and information service providers is intense. Our operations compete against a variety of firms that provide content through one or more media, such as print, broadcast, and the Internet. As with any other content or information service provider, we compete generally with other content and service providers for the time and attention of consumers and for advertising revenues. To compete successfully, we must provide sufficiently compelling and popular content and services to attract Internet users and readers and to attract advertisers hoping to reach such audiences.

Within the content niche of information technology and the Internet, we compete in particular with the publishers of computer-oriented magazines and Internet services, such as:

• CMP, a division of United Business Media
• International Data Group
• JupiterMedia (formerly, INT Media)
• TechTarget
• VNU
• Ziff Davis Media

Within the area of comparative shopping services, we compete in particular with other Internet services providing information and services to assist consumers in making a purchase decision, such as:

• Yahoo! Shopping
• MSN Shopping
• Dealtime
• PriceGrabber

In the overall market for Internet users, we compete with other Internet content and service providers, including Web directories, search engines, shareware archives, sites that offer original editorial content, commercial online services, e-commerce sites and solution providers, and sites maintained by Internet service providers.

At December 31, 2002, we had approximately 1,800 employees on a worldwide basis.

Our success and ability to compete is dependent in part on the goodwill associated with our trademarks, trade names, service marks and other proprietary rights and on our ability to use the U.S. and foreign laws to protect our intellectual property, including our original content, our editorial features, the various databases of information that we maintain and make available through our Internet channels or by license, and the appearance of our Internet channels.

We own federal trademark registrations for a number of our marks in the United States and in some of the foreign countries where we do business. Trademark registrations are infinite in duration based on our continued use. We also claim common law protection on certain names and marks that we have used in connection with our business activities. We are a defendant in pending litigation in which a jury found that our use of the name "mySimon" infringes the trademark rights of a third party. If the jury's verdict is upheld on appeal, we will have sixty days to change the name of our mySimon Internet site. This litigation is more fully described under Item 3 - - "Legal Proceedings".

We rely on trade secret and copyright laws to protect the proprietary technologies that we have developed to manage and improve our Internet channels and advertising services. We cannot assure you that such laws will provide sufficient protection to us, that others will not develop technologies that are similar or superior to ours, or that third parties will not copy or otherwise obtain and use our technologies without authorization.

We have 11 patent applications pending with respect to certain of our software systems, methods and related technologies. We have been issued three U.S. patents. U.S. patents have a duration of 20 years. We can offer no assurance that any other applications will be granted. In addition, we can offer no assurance that our patents will not be challenged, invalidated or circumvented, or that the rights granted in connection with our patents will provide a competitive advantage for us.

We also rely on certain technology licensed from third parties. We may be required to license additional technology in the future for use in managing our Internet channels and providing related services to users and advertising customers.

Although there are currently few laws and regulations directly applicable to the Internet, a range of new laws and regulations have been proposed, and could be adopted, covering issues such as privacy, obscene or indecent communications, taxation of Internet transactions and the pricing, characteristics and quality of Internet products and services. Risks associated with increased legislation are outlined in Item 7 under "Management's Discussion and Analysis of Financial Condition and Results of Operations" - Risk Factors - CHANGES IN REGULATIONS COULD ADVERSELY AFFECT THE WAY THAT WE OPERATE."

We believe that advertising sales on the Internet, as well as in traditional media, fluctuate significantly with economic cycles and during the calendar year, with spending being weighted towards the end of the year. Advertising expenditures account for a majority of our revenues. Fluctuations in advertising expenditures generally, or with respect to Internet- based advertising specifically, could therefore have a material adverse effect on our business, financial condition or operating results. We may also experience fluctuations during the calendar year in connection with our lead-based shopping services, which are weighted towards the end of the year and which may reflect trends in the retail industry.

We are headquartered in San Francisco, California, where we occupy approximately 283,000 square feet of office space. In addition to our San Francisco office, we have several offices throughout the United States, including Cambridge, Massachusetts, Louisville, Kentucky and New York City. We also have offices in Europe, Asia and Australia.

We currently still have under lease several properties that have been abandoned. During 2002, we subleased or terminated several of the abandonment properties, but we still have several properties that have not been subleased or terminated. We have an accrued liability of $9.8 million, as of December 31, 2002, related to our abandoned properties. (Also see Footnote (11) of our consolidated financial statements included in Item 8).

During 2002, we negotiated an amendment to the lease for our headquarters in San Francisco. This amendment, which was entered into effective August 1, 2002, reduced the future rent payments by an aggregate of $45.1 million over the remaining term of the lease in exchange for a payment of $8.0 million and the posting of a $2.0 million letter of credit for three years.

In August 1999, Simon Property Group (SPG) filed a trademark infringement suit in federal district court in Indianapolis against mySimon, Inc. (mySimon), a subsidiary of CNET acquired on February 29, 2000. SPG alleged that the mySimon trademark infringed SPG's "Simon" trademark. On August 31, 2000, following a trial on the subject, the jury found in favor of SPG and awarded damages against mySimon in the amount of $11.5 million in compensatory damages, $5.3 million for corrective advertising, and $10.0 million in punitive damages. On September 25, 2000, the court entered an order establishing an escrow for royalties pending final resolution of the litigation where mySimon pays into escrow 2% of its gross cash receipts each month.

On January 24, 2001, the judge eliminated the $11.5 million compensatory damages award, reduced the $10.0 million punitive damages award to the statutory minimum of $50,000, and offered SPG the opportunity to accept ten dollars (a remittitur) for damages attributable to corrective advertising in exchange for immediate entry of judgment for the entire case in lieu of a re-trial on the subject of corrective advertising. On February 14, 2001, SPG filed its election to seek a re-trial on the issue of corrective advertising in lieu of the ten-dollar remittitur. The re-trial has been taken off calendar pending a ruling from the court on whether the re-trial should be dismissed. Under Indiana law, the amount of punitive damages is capped at the greater of three times compensatory damages or $50,000. Accordingly, it is not possible to determine the amount of punitive damages, if any, that may be payable until the issue of damages for corrective advertising has been resolved. It is not possible to predict the amount of damages attributable to corrective advertising that could be awarded in a re-trial; however, if the determination is adverse to us, the amounts could be material to our results of operations and financial condition. Accordingly, no provision for ultimate settlement of these issues has been included in the accompanying condensed consolidated financial statements.

The judge's January 24, 2001 order also provided that if the jury's verdict of trademark infringement is upheld on appeal, mySimon will be required to change its name and domain name. The judge's January 24, 2001 order states that when final judgment is entered he will stay the name change pending the completion of the appeal process. If the jury's verdict of infringement is upheld on appeal, mySimon will have 60 days to change its name after the appellate court rules and will be entitled to redirect traffic from www.mysimon.com to its new website for one year following the name change. mySimon plans to appeal the finding of trademark infringement once judgment is entered in the lower court. In 2001, SPG appealed the judge's order to the 7^th Circuit, requesting that mySimon change its name and domain name immediately, and that mySimon be limited to thirty days to redirect users to a new website. The 7^th Circuit dismissed SPG's appeal on March 13, 2002.

On December 7, 2001, mySimon filed a motion for a dismissal of the case or, alternatively a new trial, based on newly discovered evidence it believes SPG should have produced prior to the August 2000 trial. The parties have submitted briefs on this issue and are awaiting the judge's decision.

On October 17, 2000, we acquired Ziff-Davis, Inc. (Ziff-Davis), which was a defendant in the following cases:

In December 2000 and February 2001, two groups of former employees of Ziff-Davis filed similar lawsuits in the United States District Court for the District of Massachusetts under the titles Beach et al v. Softbank Corp and Drebin and Lane v. Softbank Corp. The lawsuits name as defendants Softbank Corp, Softbank Holdings and Ziff-Davis, Inc. The complaints allege (a) violations of Section 10(b) and Section 20 of the Securities Exchange Act, (b) violations of state laws against fraud and negligent misrepresentation and (c) breach of fiduciary duty in connection with the exchange of the plaintiffs' options to purchase Softbank shares for options to purchase shares of Ziff-Davis in 1999, prior to CNET's acquisition of ZDNet. The complaints do not specify an amount of damages. Defendants' motion to dismiss was denied by the court in the second quarter of 2002, and discovery is now underway. Softbank America has agreed to indemnify CNET against these claims to the extent not covered by insurance.

In July 2001, three former employees of ZDNet filed a complaint against ZD, Inc., ZDNet, Inc., CNET Networks, Inc. and Dan Rosensweig in the Superior Court of the State of California for the City and County of San Francisco under the caption Rapport et al v. ZD, Inc. The remaining claims alleged that the defendants engaged in fraud and negligent misrepresentation in not disclosing to plaintiffs that ZDNet was in negotiations with CNET regarding a potential merger. In the fourth quarter of 2002, the parties settled this case for an amount that is not material to CNET.

Two shareholder class action lawsuits were filed in the United States District Court for the Southern District of New York on August 16, 2001 and September 26, 2001, against Ziff- Davis, Eric Hippeau and Timothy O'Brien, and investment banks that were the underwriters of the public offering of ZDNet series of Ziff-Davis stock (the ZDNet Offering). One of the complaints also names CNET as a defendant, as successor in liability to Ziff-Davis. The complaints are similar and allege violations of the Securities Act of 1933, and one of the complaints also alleges violations of the Securities Exchange Act of 1934. The complaints allege the receipt of excessive and undisclosed commissions by the underwriters in connection with the allocation of shares of common stock to certain investors in the ZDNet Offering and agreements by those investors to make additional purchases of stock in the aftermarket at pre-determined prices. Plaintiffs allege that the Prospectus for the ZDNet Offering was false and misleading and in violation of the securities laws because it did not disclose the arrangements. The action seeks damages in an unspecified amount. The action is being coordinated with over 300 nearly identical actions filed against other companies. No date has been set for any responses to the complaints. On February 19, 2003, the Court granted our motion to dismiss the Section 10(b) claim with leave to replead, and denied the motion to dismiss the Section 11 claim. The issuers and their insurers have been engaged in settlement discussions with the plaintiffs. We believe we are entitled to indemnification from the underwriters, however we have not received confirmation of coverage to date.

During 2002, we offered to make a cash payment to the owner of one of our leased properties in San Francisco in exchange for the termination of our lease. The landlord rejected the offer, and we subsequently ceased rent payments on the property. In December 2002, the landlord sued CNET in San Francisco Superior Court for the collection of past due rent amounts together with damages related to the early termination of the lease due to our failure to pay rent when due. The landlord is requesting damages in an amount, which represents two months of unpaid rent plus interest together with future rent through the expiration of the lease, along with other unquantified damages. We have included in our lease abandonment accrual our estimated costs related to this property. Discovery on the case has just commenced.

There are no other legal proceedings to which we are a party, other than ordinary routine litigation incidental to our business that is not expected to be material to our business or financial condition.

None.

Our common stock is traded on the National Market System of the Nasdaq Stock Market ("Nasdaq") under the symbol "CNET".

The following table sets forth the ranges of high and low trading prices of the common stock for the quarterly periods indicated, as reported by Nasdaq.

We have never declared or paid a cash dividend on our common stock. We intend to retain any earnings to cover operating losses and working capital fluctuations and to fund capital expenditures and expansion. We do not anticipate paying cash dividends on our common stock in the foreseeable future.

At March 14, 2003, the closing price for our common stock as reported by Nasdaq, was $1.75, and the approximate number of holders of record of our common stock was 970.

Incorporated by reference from our definitive Proxy Statement for our 2003 annual meeting, which will be filed pursuant to Regulation 14A (the "Proxy Statement"), under the caption "Equity Compensation Plan Information".

The following table sets forth selected consolidated financial data and other operating information. The financial data and operating information do not purport to indicate results of operations as of any future date or for any future period. The financial data and operating information is derived from our audited consolidated financial statements and should be read in conjunction with the consolidated financial statements, related notes and other financial information included herein.

(000s, except share and per share data)

                                                           Fiscal Year Ended
                                       ------------------------------------------------------------------------
                                           2002         2001(a)          2000           1999           1998
                                       ------------   ------------   ------------   ------------   ------------
Consolidated Statement of
 Operations Data:
Total revenues...................... $     236,957  $     285,805  $     264,019  $     112,345  $      57,477
Total operating expenses(b).........       618,271      2,152,930        580,877        173,483         54,520
Operating income (loss).............      (381,314)    (1,867,125)      (316,858)       (61,138)         2,957
Total non-operating income (expense)           436       (191,370)      (276,721)       735,361             66
Net income (loss)...................      (360,585)    (1,989,488)      (483,980)       416,908          3,023
Basic net income (loss)
  per share......................... $       (2.60) $      (14.52) $       (5.18) $        5.80  $        0.05
Diluted net income (loss)
  per share......................... $       (2.60) $      (14.52) $       (5.18) $        5.05  $        0.04
Shares used in basic per
  share calculation.................   138,850,094    137,062,987     93,460,649     71,820,082     65,782,586
Shares used in diluted
  per share calculation.............   138,850,094    137,062,987     93,460,649     83,373,019     71,623,402

Consolidated Balance Sheet Data:

Cash and cash equivalents........... $      47,199  $      93,439  $     148,797  $      53,063  $      51,537
Total marketable debt securities.......     79,841        123,537        134,687        175,787             --
Working capital.....................        64,666        138,541        280,042        603,709         59,657
Total assets........................       377,295        814,780      2,862,361      1,230,311         88,357
Total debt(d)(e)....................       117,958        176,534        186,025        184,864          1,682
Stockholders' equity................       186,057        543,499      2,552,773        705,838         76,473

(a) On July 1, 2001, we acquired TechRepublic, Inc. (TechRepublic). On October 17, 2000, we acquired ZDNet, Inc. (ZDNet). On February 29, 2000, we completed the acquisition of mySimon, Inc. (mySimon). Also see Note (3) of our consolidated financial statements included in Item 8. No financial data or operating information related to these acquired companies is included in the Selected Consolidated Financial Data prior to the dates of acquisition.

(b) Operating expenses include amortization of intangible assets of $34.7 million for the year ended December 31, 2002. Operating expenses include amortization of goodwill and intangible assets of $678.6 million, $340.4 million and $15.0 million for the years ended December 31, 2001, 2000 and 1999, respectively. As part of the transition provisions of SFAS 142, we reviewed for impairment all previously recognized intangible assets that have been determined to have indefinite useful lives. We completed our transition testing as of June 30, 2002. In no instance did the carrying amount of a reporting unit exceed its fair value as of January 1, 2002, and therefore, we determined that there was no impairment resulting from these transition tests. Under the provisions of SFAS 142, we performed our annual goodwill and intangible asset impairment test as of August 31, 2002. The results of this annual impairment test indicated the carrying value of goodwill and other intangible assets for the U.S. Media reporting unit exceeded their implied fair values. An impairment charge of $238.8 million for goodwill and of $40.5 million for intangible assets of that reporting unit was recorded in the third quarter of 2002. Additionally, a loss on the disposal of fixed assets of $11.2 million was recorded. Also in 2002, a total of $12.4 million was included in operating expenses representing costs to integrate and realign our business.

During the third quarter of 2001, a charge of $1.1 billion was taken to adjust the carrying value of our goodwill to fair value. Also included in operating expenses in 2001, was a charge of $21.3 million related to the consolidation of our office space, which resulted in the abandonment of several leased facilities, as well as $21.7 million in other costs incurred to integrate the operations of ZDNet into our operations. In 1998, operating expenses included an unusual item consisting of an expense reversal of $0.9 million relating to a real estate reserve.

(c) During 2002, 2001 and 2000, we incurred impairment losses of $0.2 million, $26.9 million and $393.4 million, respectively, on marketable equity securities and $15.4 million, $148.4 million and $5.7 million on privately held investments, respectively, for which other-than- temporary declines in value were deemed to have occurred.

(d) On March 8, 1999, we completed a private placement of 5% Convertible Subordinated Notes with gross proceeds of $172.9 million. On May 9, 1999, we sold our effective 40% ownership interest in Snap.com. to NBCi. The transaction resulted in a gain of $541.2 million in 1999. Also, during 1999, we sold a portion of our holdings of Vignette Corporation for a gain of approximately $172.3 million.

(e) In 2002, we repurchased $59.2 million principal amount of our 5% Convertible Subordinated Notes for $36.7 million, resulting in a gain of $21.6 million, net of the write-off of related capitalized debt issuance costs of $0.9 million. On August 31, 2001, NBC acquired any NBC Internet, Inc. (NBCi) shares it did not already own. Upon the purchase of the NBCi shares owned by us, the maturity date for our NBCi Trust Automatic Common Exchange Securities (TRACES) obligation accelerated. In conjunction with this accelerated repayment, CNET recorded a loss of $10.6 million, consisting of $9.0 million of early interest payment, which was not refundable, and a write-off of $1.6 million of capitalized debt issue costs.

CNET Networks, Inc., a leading global media company informing and connecting buyers, users and sellers of technology, produces a branded, global Internet network, print publications and a technology product database for both businesses and individuals. Using unbiased content as our platform, we have built marketplaces for technology and consumer products, and, through our CNET Channel division, we are the primary provider of information powering computer and electronics sales and distribution channels.

We earn revenues from:

• sales of advertisements on our Internet network and in our print publications
• fees earned when our Internet network users click on an advertisement or text link to visit the websites of our merchant partners, which we refer to as "leads"
• revenues from licensing our CNET Channel product database
• subscriptions to our ChannelOnline product procurement service, as well as other paid services

Cost of revenues includes costs associated with the production and delivery of our Internet channels, print publications and creation of our product database and related technology. The principal elements of cost of revenues for our operations are payroll and related expenses for the editorial, production and technology staff and costs for facilities and equipment.

Sales and marketing expenses consist primarily of payroll and related expenses, consulting fees and advertising expenses. General and administrative expenses consist of payroll and related expenses for executive, finance and administrative personnel, professional fees and other general corporate expenses.

The acquisitions of mySimon in February 2000 and ZDNet in October 2000 significantly expanded our network and contributed significantly to revenues, cost of revenues and operating expenses from their acquisition dates in 2000. The acquisition of TechRepublic in July 2001 also served to expand our network and contributed to revenues, cost of revenues and operating expenses beginning with the third quarter of 2001. These acquisitions were accounted for using the purchase method of accounting, and the financial results of their operations are included in our financial statements beginning on the dates of their respective acquisition.

During 2002, we made several small strategic acquisitions, which served to complement our current services and expand services internationally. See Note (3) of our consolidated financial statements included in Item 8.

During the fourth quarter of 2000, we completed our acquisition of ZDNet. Subsequent to the acquisition, we incurred costs related to integrating the operations of ZDNet with our operations through the integration of duplicative businesses. Throughout 2001 and during the first quarter of 2002 as part of the integration process, we evaluated our staffing requirements related to a more challenging business environment and focused on increasing efficiencies in our operations. We initiated reductions in our global workforce during 2001 resulting in the elimination of positions representing approximately 30% of our workforce. We also incurred additional expenses as we continued to lower our cost structure through the discontinuance of several non-profitable or non-growth areas of our Internet and broadcasting operations and the abandonment of certain leased properties. We have referred to these costs as "integration costs". These integration costs amounted to $2.9 million in 2002 and $43.0 million in 2001 and are included in cost of revenues, sales and marketing, and general and administrative expense, as more fully described below.

During the remainder of 2002, we took actions to further simplify our organizational structure by realigning our business around key business categories, resulting in, among other things, the elimination of positions representing approximately 10% of our workforce. Costs incurred in connection with this realignment consist primarily of severance, lease abandonment charges and contract termination costs and are referred to as "realignment expenses". These costs totaled $9.5 million for the year ended December 30, 2002. Additionally, we have invested in several meaningful technology initiatives including sales force automation, a unified ad delivery platform and a unified publishing platform. This investment is expected to simplify our operations and build a scalable infrastructure. We believe our integration and realignment efforts and the creation of a standardized, global technology platform have resulted in costs savings and scalable systems that will enable us to grow more efficiently.

During 2003, we expect additional charges related to further realignment of our key business categories. We estimate a cash payment of approximately $4.0 to $5.0 million in the first quarter of 2003 related to elimination of positions representing approximately 5% of our workforce and the termination of our on-air radio operations.

We incurred a net loss of $360.6 million, $2.0 billion and $484.0 million in 2002, 2001 and 2000, respectively. The net loss in 2002 was primarily due to the impairment of goodwill and intangibles and certain other assets of $290.5 million, the amortization of intangible assets of $34.7 million, and the impairment of privately held investments of $15.4 million offset by a $21.6 million gain on the early retirement of debt. The net loss in 2001 was generated primarily from the impairment of goodwill of $1.1 billion, the amortization of goodwill and intangible assets of $678.6 million and the realized loss on the impairment of our privately and publicly held investments of $175.3 million. The net loss in 2000 was generated primarily from realized losses on the impairment of investments of $399.1 million and amortization of goodwill and intangibles of $340.4 million.

Total revenues were $237.0 million and $285.8 million for the years ended December 31, 2002 and 2001, respectively. The decrease in revenues of $48.8 million for 2002 compared to 2001 was primarily attributable to a decrease in advertising and marketing spending on our Internet properties. The downturn in the economy, which began in 2001, has resulted in an overall softness in advertising. In particular, the slowdown in the technology industry has resulted in a decrease in technology marketing, our primary source of revenues. The technology market weakness has continued for an extended period and has continued to put downward pressure on revenues. Revenues for the year ended December 31, 2001 included six months of revenues for TechRepublic, which was acquired in July 2001.

A portion of our revenues was received in the form of securities of our customers amounting to approximately $4.7 million for the year ended December 31, 2001. No such revenues were received in 2002. In addition, for the year ended December 31, 2002, approximately $11.6 million of our revenues were derived from barter transactions compared to $18.4 million for the year ended December 31, 2001, whereby we delivered advertisements on our Internet channels in exchange for advertisements on the Internet sites of other companies. These revenues and marketing expenses were recognized at the fair value of the advertisements received and delivered, and the corresponding revenues and marketing expenses were recognized when the advertisements were delivered.

Internet revenues were $183.3 million and $241.2 million and represented 77% and 84% of total revenues for the year ended December 31, 2002 and 2001, respectively. The decrease in revenues of $57.9 million for the year ended December 31, 2002 compared to 2001 was primarily due to a decrease in advertising and marketing spending. The downturn in the economy, which began in 2001, has resulted in an overall softness in advertising. In particular, the slowdown in the technology industry has resulted in a decrease in technology marketing, our primary source of revenues. During 2002, we averaged approximately 287,000 leads per day from our shopping services, a decrease of 10% over 319,000 leads per day in 2001. The decrease in leads was due to a reduction in the number of times that users of our Internet properties elected to link through to our merchant marketing partners.

Publishing revenues were $53.6 million and $44.6 million and represented 23% and 16% of total revenues for the year ended December 31, 2002 and 2001, respectively. The increase in publishing revenues for 2002 over prior year is due to an increase in our custom publishing with the majority of the increase resulting from our custom printing arrangements with Gateway Inc.

For the year ended December 31, 2002 as compared to the prior year, revenues have decreased for the U.S. Media and International Media segments while they have remained relatively flat for Channel Services. The decreases in revenues for U.S. Media and International Media are primarily related to the downturn in the technology market resulting in reductions in technology companies' advertising and marketing spending, the primary source of our revenues, partially offset by an increase in our print revenues.

For the year ended December 31, 2002, all three business segments have decreased operating costs as compared to the prior year primarily as an effect of headcount reductions and other cost saving measures.

Total cost of revenues was $146.7 million and $178.1 million for the years ended December 31, 2002 and 2001, representing approximately 62% of total revenues for both years. The decrease in the cost of revenues in the year ended December 31, 2002 is primarily related to the headcount reductions partially offset by an increase due to the inclusion of a full year of costs in 2002 from the TechRepublic acquisition in July 2001 and the expansion of China operations in the second quarter of 2001. For the year ended December 31, 2002, $778,000 of realignment expenses and integration costs were included in cost of revenues. For the year ended December 31, 2001, $8.7 million of integration expenses were included in cost of revenues.

Sales and marketing expenses were $76.1 million and $129.5 million for the years ended December 31, 2002 and 2001, respectively, representing 32% and 45% of total revenues for each of the years. The decrease in sales and marketing expenses in the current year period as compared to the same period of the prior year was primarily due to a decrease in marketing spending and headcount reductions. Approximately $339,000 of realignment expenses and integration costs were included in sales and marketing expenses for the year ended December 31, 2002. Approximately $2.0 million of integration expenses were included in sales and marketing expenses for the year ended December 31, 2001.

General and administrative expenses were $44.6 million and $67.3 million for the year ended December 31, 2002 and 2001, representing 19% and 24% of total revenues for each of the periods. Approximately $11.3 million of realignment expenses and integration costs were included in general and administrative for the year ended December 31, 2002. The majority of the integration and realignment expense incurred in general and administrative expenses in 2002 consisted of $5.2 million in severance costs and $4.4 million in lease abandonment costs. Approximately $32.3 million of integration costs were included in general and administrative expenses for the year ended December 31, 2001. Of these costs in 2001, $21.3 million were related to lease abandonment charges.

Total depreciation expense was $25.7 million and $24.4 million for 2002 and 2001, respectively. The increase in depreciation expenses of $1.3 million from 2001 to 2002 related primarily to capital additions of $19.0 million and an increase in fixed assets from acquisitions partially offset by the disposal of fixed assets.

Intangible asset amortization expense was $34.7 million for the year ended December 31, 2002. Goodwill and intangible asset amortization expense was $678.6 million for the year ended December 31, 2001. Effective January 1, 2002, we adopted the provisions of SFAS 142. Under SFAS 142, goodwill is no longer amortized. If the non-amortization provisions of SFAS 142 had been effective in 2001, net loss and basic and diluted net loss per share for the year ended December 31, 2001 would have been $1.4 billion and $(9.94), respectively.

As part of the transition provisions of SFAS 142, we reviewed for impairment all previously recognized intangible assets that have been determined to have indefinite useful lives. We completed our transition testing as of June 30, 2002. In no instance did the carrying amount of a reporting unit exceed its fair value as of January 1, 2002, and therefore, we determined that there was no impairment resulting from these transitions tests. We performed our annual evaluation of goodwill and intangible assets impairment as of August 31, 2002. The results of this annual impairment test indicated the carrying value of goodwill and other intangible assets for the U.S. Media reporting unit exceeded their implied fair values. An impairment charge of $238.8 million for goodwill and $40.5 million for intangible assets of that reporting unit was recorded in the third quarter of 2002. Also included in asset impairment and disposals was a loss on disposal of fixed assets of $11.2 million.

In the third quarter of 2001 (prior to the adoption of SFAS 142), due to the significant decline in CNET's stock price once trading reopened after the events of September 11^th, the overall continued decline in market values of businesses in the media industry, and the continued further decline in the overall markets, we evaluated the recoverability of our enterprise-wide goodwill under the provisions of SFAS 121. This recoverability analysis indicated that there had been impairment to our enterprise-wide goodwill. Therefore, a charge of $1.1 billion was taken during the third quarter of 2001 to adjust the carrying value of these assets to their fair value.

We had a gain on sales of investments of $2.9 million and $9.5 million for the years ended December 31, 2002 and 2001, respectively. We had a loss on the sales of investments of $123,000 for the year ended December 31, 2002 as compared to $8.6 million for the year ended December 31, 2001. The decrease in realized gain and loss on sales of investments in 2002 compared to prior year resulted primarily from a decrease in the amount of securities sold in the present period versus the prior year period. Approximately $2.3 million of the gain realized in 2002 was from the sale of our share in a joint venture.

We had a realized loss on impairment of public investments of $154,000 and $26.9 million for the years ended December 31, 2002 and 2001, respectively. We had a realized loss on impairment of private investments of $15.4 million for the year ended December 31, 2002 and of $148.4 million for the year December 31, 2001.

Interest income is derived from our cash and cash equivalents and investments in marketable debt securities. Interest income was $4.9 million and $11.9 million for 2002 and 2001, respectively. Interest income decreased due to lower balances of marketable debt securities held in 2002 as compared to 2001.

Interest expense is primarily incurred on our 5% Convertible Subordinated Notes. Interest expense was $10.3 million and $15.6 million for 2002 and 2001, respectively. The decrease in interest expense in 2002 related to the early repayment of our TRACES obligations during 2001, as well as the early retirement of $59.2 million of our 5% Convertible Subordinated Notes during the second half of 2002.

In 2002, we repurchased $59.2 million principal amount of our 5% Senior Convertible Notes for $36.7 million. In connection with these repurchases, we recorded a gain of $21.6 million, net of the write-off of related capitalized debt issuance costs of $0.9 million.

In conjunction with the accelerated repayment of our TRACES obligations in the third quarter of 2001, we recorded a loss of $10.6 million consisting of $9.0 million of early repayment interest penalty and a write-off of $1.6 million of capitalized debt issue costs.

For the years ended December 31, 2002 and 2001, we had an income tax benefit of $20.3 million and $69.0 million, respectively. Management believes that sufficient uncertainty exists regarding the future realization of deferred tax assets and, accordingly, a valuation allowance has been provided against the gross deferred tax assets to properly reflect only recoverable taxes as required by SFAS 109.

Effective tax rates for the years ended December 31, 2002 and 2001 were 5.33% and 3.35%, respectively. The income tax benefit recorded in 2002 and 2001 was lower than the statutory rates due to $314.0 million and $1.8 billion, respectively, of impairment of goodwill and nondeductible amortization of goodwill and other intangible assets, for which no tax benefit was recognized. The tax benefit in 2001 was also reduced due to losses on privately held investments for which there was sufficient uncertainty as to whether we would receive a tax benefit in the future.

At December 31, 2002, CNET had net operating losses of $165.3 million. A total of $24.6 million of these losses generated in 2002 will be carried back to previous tax years. Of the remaining losses, approximately $107.0 million are related to federal net operating losses from the ZDNet acquisition, which took place in 2000. These losses are subject to limitations on their utilization due to the change in ownership and will begin to expire in 2011. Operating losses generated in 2002 were primarily related to amortization of intangible assets and losses from operations. Cumulative foreign net operating losses are approximately $45.9 million.

Depreciation

Realized Gain and Loss on Sale of Investments

Other Expense

Net Loss

     (000s)                                                 LESS THAN                  AFTER
      December 31, 2002                         TOTAL        1 YEAR     1 - 3 YEARS   3 YEARS
                                             ------------  -----------  ------------ ---------
      Long-term debt                        $      117.9  $       0.2  $      114.0 $     3.7
      Non-cancellable operating
       lease obligations                           218.0         24.5          56.8     136.7
      Capital lease obligations                      0.5          0.3           0.2        --
                                             ------------  -----------  ------------ ---------
                                            $      336.4  $      25.0  $      171.0 $   140.4
                                             ============  ===========  ============ =========

In conjunction with the ZDNet acquisition in 2000, we assumed a guarantee of the obligations of Ziff Davis Media Inc., an unaffiliated company, under a New York City office lease for a total of 399,773 square feet. In connection with that guarantee, we also have a letter of credit for $15.2 million outstanding as a security deposit. As there is no present obligation to make any payments in connection with this guarantee, we have not recorded any liability for this guarantee in our financial statements. This lease expires in 2019. The annual average cost per square foot is approximately thirty dollars over the remaining term of the lease. Through a sublease from Ziff Davis Media Inc., CNET currently occupies 49,140 square feet of the office space covered under this lease. Ziff Davis Media Inc. currently occupies 206,176 square feet of this space. There are two additional subleasees, The Bank of New York and Softbank (a related party), who collectively occupy a total of 144,457 square feet. During the second quarter of 2002, Softbank subleased its 30,885 square feet to The Beanstalk Group. According to an August 12, 2002 Ziff Davis Media Inc. press release, Ziff Davis Media announced that the company had received approval from its bondholders and bank lenders for its out-of-court financial restructuring plan. Some of the details of its restructuring plan can be found at Ziff Davis Media's company website. As of December 31, 2002, the total minimum lease payments remaining until the end of the lease term were $187.5 million, excluding the amounts attributable to our sublease. If the financial condition of any of the sublessees or the primary lessee were to deteriorate and thereby result in an inability to make their lease payments, we would be required to make their lease payments under the guarantee.