Cendant Articulates Its Strategy for Internet/Online Business
Cendant to Sell Three of its Internet Companies -- RentNet, Match.com and
Bookstacks, Inc.
The Company Will Become an Outsource Services Provider of its
Fulfillment/Distribution Capability to E-Commerce Companies
NEW YORK, Feb. 10 /PRNewswire/ -- In its fourth quarter 1998 earnings press release issued today, Cendant Corporation (NYSE: CD) announced it has developed a new strategy for its Internet business, following a comprehensive company-wide review. The strategy includes:
* Proposed sale of three of Cendant's Internet companies -- RentNet,
Match.com and Bookstacks, Inc. (Books.com, MusicSpot.com and
GoodMovies.com).
* Continued investment in the Company's remaining Internet membership
business, particularly NetMarket, which are an integral part of its
overall individual membership business
* Active pursuit of strategic partnerships that will leverage Cendant's
online membership assets, accelerate growth and maximize shareholder
value.
* Establishment of an outsourcing services business that manages
fulfillment and distribution for non-competing third-party e-commerce
providers.
In connection with the proposed sale of three of Cendant's Internet companies, Cendant announced that it has engaged ING Barings Furman Selz to manage the sale process.
"These businesses, while enjoying strong growth and, in the aggregate marginally profitable, do not benefit from our core competencies," said Cendant's Chairman, President and CEO, Henry R. Silverman. "We have no comparative advantage and believe RentNet, Bookstacks, Inc. and Match.com will be very valuable to other companies in the interactive world to whom these businesses have strategic relevance."
Cendant's remaining Internet membership business -- including NetMarket (discount shopping), Travelers Advantage (discount travel services), AutoVantage (discount auto services), and Privacy Guard (credit and personal information services) -- is composed of memberships acquired through Internet affinities, membership services provided online, and certain services provided to non-members online. These businesses are an integral part of Cendant's individual membership business and Cendant intends to continue to invest in these businesses, which are currently unprofitable. In addition, Cendant will continue to seek strategic partnerships, to allow the Company to continue to be positioned appropriately in the fast-changing Internet business environment and to accelerate the process by which this business ceases to reduce Cendant's earnings.
"Non-Internet companies that lose money to build their online businesses are penalized when earnings growth is affected," Mr. Silverman said. "The long-term potential of our Internet business is significant, and we will make the investments necessary to preserve that upside. To the extent we can accelerate a shift to Cendant's 'for profit' model, that will be additional upside for our shareholders."
Mr. Silverman stated: "Through its strategic marketing alliance with America Online and other major Internet companies, the Company has more than one million active online members of its remaining Internet businesses. We view our online membership business as an extension of our off-line membership business, which supports nearly 30 million individual members. The services provided are essentially the same, except that the communications vehicle is the member's computer rather than the telephone or mail."
Furthermore, Cendant's significant off-line commerce infrastructure currently supports the Company's online business through long-standing relationships with over 1,500 product vendors and service providers, a scaleable communications and order-processing infrastructure, an experienced merchandising group with over 25 buyers, extensive customer service capabilities, and in-house software development and database management. Cendant has determined that this infrastructure will be made available as a resource to other e-commerce companies whose business models do not directly compete with the Company's membership business.
Mr. Silverman stated: "Our goal is to become an integral part of the merchandising and distribution backbone of e-commerce. Our comparative advantage is our infrastructure -- the barrier to entry for many e-commerce companies -- and by offering those capabilities to others, we should be able to generate higher profits for both Cendant and our newfound e-commerce customers who will benefit from this valuable outsource service.
The Company said it can further increase the value proposition for its off-line and online members, as well as for members of third party e-commerce companies, by providing additional volume discounts and higher overall consumer satisfaction with the products or services purchased.
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