Article from CBSMarketwatch today 12noon EST..(and levy, no need for the stress ball right now....just calmly reading and gathering info....)
KLP
cbs.marketwatch.com
InfoSpace to acquire Go2Net
Integration issues may loom ahead, some say
By August Cole & Bambi Francisco,
CBS.MarketWatch.com
Last Update: 12:20 PM ET Jul 27, 2000
NewsWatch
Latest headlines
SEATTLE (CBS.MW) -- Shares of InfoSpace plunged 24 percent
Thursday after the wireless Internet infrastructure company's
announcement to buy Go2Net for $2.7 billion in stock undermined its
better-than-expected quarterly reports.
InfoSpace (INSP: news, msgs) fell 11 5/8 to 36 as 9.7 million shares
changed hands. In sympathy with its proposed partner, Go2Net (GNET:
news, msgs) fell from pre-market highs of 68, adding 3 5/16, or 4
percent, to 62 in recent trading.
Safa Rashtchy, an analyst at U.S. Bancorp Piper Jaffray, downgraded
InfoSpace to "buy" from "strong buy," citing concerns the combined
companies may face integration challenges before reaping the rewards of
broadband synergies.
Moreover, the price tag was deemed a bit rich.
"InfoSpace stock may be down short-term due to the premium paid for
Go2Net, leading to continued stock volatility," said Michael Graham, an
analyst at Robertson Stephens. "We suspect the next big move in the
stock will come when revenue from the wireless rollouts becomes big,
which we estimate will be in the fourth quarter."
Graham estimates that InfoSpace generated $3.7 million in revenue from
licensing and transaction fees paid by wireless carriers in the just reported
quarter. By the fourth quarter of this year, Graham predicts wireless
revenue could grow to $14.2 million, or about 37 percent of his estimated
$38.4 million in total revenue. Graham expects revenue for the 2000 to
reach $110 million, excluding Go2Net's contribution.
That estimate was bumped up after InfoSpace reported second-quarter
results Wednesday. InfoSpace posted a loss of 1 cent a share on revenue
of $24.6 million. As expected, the results beat expectations but analysts
have been hard-pressed to find a catalyst to drive shares higher.
Executives of both InfoSpace and Go2Net urged analysts and the
investment community to consider the synergies of the combined
companies.
Deal details
According to the terms of the deal, InfoSpace will
offer 1.82 shares for each Go2Net share,
representing a 45 percent premium to its
Wednesday Nasdaq closing price of 60 9/16.
The companies said the deal will allow InfoSpace,
whose name the post-merger company will adopt,
to offer a broader range of e-commerce services to
an anticipated combined base of more than 2
million merchants.
"There are a lot of cross-selling opportunities," said
InfoSpace Chairman Arun Sarin in an interview
with CBS.MarketWatch.com.
Go2Net offers back-end products to merchants,
such as payment services, while InfoSpace has
front-end products such as shopping carts and
other storefront offerings.
Moreover, the combined company will have a
strong broadband distribution platform. InfoSpace has relationships with
wireless carriers, while Go2Net has partnerships with cable and digital
subscriber line service providers.
"The next big growth
area for InfoSpace is
the delivery of our
platform of services
over broadband,
enabling today's
unified
communications
companies to deliver
one integrated user
experience across all devices and all networks," said InfoSpace Chairman
Naveen Jain.
The deal is set to close in the fourth quarter of 2000, according to a press
release. The deal, according to the companies, will boost bottom-line
results for InfoSpace immediately.
The executive lineup at the new company will take shape under the
leadership of InfoSpace's Jain, who will be chairman, and Go2Net's
Russell Horowitz, who will be vice chairman and president. Sarin will be
vice chairman and CEO. See Net stocks. |
