LoopNetInc.,

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LoopNet announced Tuesday that it's paying $9.4 million forREApplications, an eight-year-old San Diego-based company thatdevelops software-as-a-service for the real estate industry.LoopNet CEO Richard Boyle describes REApplications as a "strong,client-centric, innovative business" that has focused on building"value and relationships" with its clients.

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REApplications provides a comprehensive, integrated suite ofcommercial brokerage automation software that enables executives,professionals and staff to manage property data and marketresearch, collaborate with clients on transactions, manageprospects and client relationships and perform other commercialbrokerage operations. LoopNet plans to operate REApplications as awholly-owned subsidiary and reports the existing senior operatingexecutives of REApplications will all remain post-acquisition.

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The purchase is the most recent of LoopNet's efforts to weathera challenging real estate environment that has robbed its stock ofsome of its luster. LoopNet announced earlier this month that itwas expanding exposure for its showcase listings, and institutednext-generation software on its site in March.

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Founded in 1995 and IPO'd in 2006, LoopNet features more than$500 billion in properties for sale and 4.3 billion square feet ofspace for lease. However, its revenue growth is slowing andanalysts expect relatively flat earnings for the next twoyears.

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In February, the company reported fourth quarter revenue of$19.6 million, with EPS of 14 cents, beating the Street estimatesof $19.4 million and 12 cents. And it expects first quarter revenueof $20.1 million to $20.3 million, with EPS of 11 cents to 12 centsa share, including 2 cents in stock-based compensation expense,exceeding analysts' projections of $20.2 million and 11 cents.

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However, LoopNet expects full year revenue of $84 million to $86million, less than the $90.2 million analysts had expected. Basedon that projection, Cantor Fitzgerald lowered its price target onLoopNet from $29 to $18 a share. More recently, Zacks EquityResearch initiated coverage of LOOP with a sell rating and a pricetarget of $11.00 a share.

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In an April 3 report, Zacks cites concerns about "a challengingnear-term operating environment" that it expects to curtail shareprice appreciation. "Continuing macro-economic challenges willlikely put stress on the commercial real estate sector," itcontinues, "as slower economic growth combined with tight access todebt capital may limit transaction activity. "

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Analysts describe the acquisition of REApplications as apotentially beneficial long-term strategic move, even though itwill have little immediate effect on earnings. AlthoughREApplications has been profitable as a standalone business,LoopNet does not expect an immediate return on its investment. Infact, although it estimates the company will contribute $2.3million in revenue for the remainder of 2008, the revenue will beoffset by various acquisition and integration related expenses.LoopNet expects the acquisition to be dilutive to 2008 EPS in therange of a loss of $0.02 per share.

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Analysts describe the acquisition as a future-focused deal.Steve Weinstein, who follows the firm for Pacific Crest Securities,says LoopNet has broad access to commercial real estateprofessionals, which it can leverage to market REApplicationssoftware. In addition, he explains, LoopNet could benefit byincorporating REApplications in its platform.

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REApplications already serves some of the largest commercialbrokerage and property valuation firms in North America, includingLee & Associates, Coldwell Banker Commercial, Grubb & Ellis| BRE, Colliers Turley Martin Tucker, Cushman & WakefieldLePage, GVA Advantis and Integra Realty Resources. If LoopNetincorporates the same software in its online platform, it couldmake it easier for brokers to upload listings to LoopNet than tocompeting online real estate sites.

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