Auditor Expresses Doubts About Snowball's Future

Web publisher Snowball.com revealed on Friday that its auditor, Ernst & Young LLP, is doubtful about its future, according to documents filed with the Securities and Exchange Commission.

The company, which in recent weeks has embarked on a massive cost-cutting operation, said in its 10-K that Ernst & Young has “substantial doubts about the company’s ability to continue as a going concern.” The auditor cited Snowball’s continued losses and negative cash flow since its inception.

Snowball spokespeople were not available for comment.

The news comes just days after the company shuttered its ChickClick network of women-oriented sites. At one point (and on its corporate Web site still) Snowball had said the ChickClick network received 40 million page views per month.

Nevertheless, the costs associated with running the network — which competed for advertising with youth-oriented Alloy.com and the more traditional iVillage — proved too much for Snowball, which in January also sold its money-losing HighSchoolAlumni.com site to Reunion.com, for $1 million.

Snowball has not disclosed how much it stands to save after offloading both ChickClick and HighSchoolAlumni.com, but the publisher now operates only one site network, IGN, which specializes in video game, entertainment and male-oriented lifestyle sites. Snowball has called IGN its largest network.

In recent weeks, Snowball also renegotiated its real estate contract, which the company said would save it about $1.6 million annually. The agreement, which reduced Snowball’s square footage in its Brisbane, Calif. headquarters from 66,000 sq. ft. to 13,600 sq. ft. and cut nine years from its remaining 11 year-commitment, required that the firm hand over $2 million to its landlord.

While executives have demurred from giving guidance on when the company might break even, Snowball’s recent cost-cutting could go a long way toward meeting that goal. In its most recent quarter, Snowball posted a net loss of $3.2 million, or $1.80 per share, an improvement from the $4.9 million, or $2.60 per-share loss that it had seen in the previous quarter. (A year earlier, the company posted $11.5 million, or $6.09 per share, in net losses.)

Similarly, revenues grew $500,000 during last quarter, to $2.8 million, although that figure is almost half of the company’s revenues a year earlier.

As of December, the company had $8.3 million in cash and marketable securities. It is slated to report its first quarter results April 25.