NBC to Shut Down NBCi
from Bloomberg News
NEW YORK -- General Electric Co.'s NBC television unit will buy the rest of NBC Internet Inc. it doesn't already own for about $85 million and fold it into the company as NBC seeks to cut losses at the Web site.
NBC, owner of the top TV network among young adults and 38.6 percent of NBC Internet, will pay $2.19 for each share of NBC Internet, or NBCi, said spokeswoman Rebecca Tompkins. That's 46 percent more than San Francisco-based NBCi's price Friday.
NBC put more than $100 million in cash and assets into NBCi after combining NBC.com, the Xoom.com commerce site and Snap.com Web search site two years ago, NBC Chief Financial Officer Mark Begor said. The company had hoped to compete with the biggest Internet sites, such as Yahoo! Inc. and Microsoft Corp.'s MSN. A decline in advertising on the Web put NBCi's survival in doubt.
"GE probably wanted to put NBCi out of its misery and consolidate it back in,'' said ABN Amro Inc. analyst Arthur Newman, who has a "hold'' rating on NBCi. "It certainly wasn't working as a stand-alone entity.''
NBCi shares rose 64 cents to $2.14 in Nasdaq Stock Market trading. The shares have plunged 98 percent from a high in January 2000.
The NBCi.com site lets users search the Internet, offers news and other information and online shopping. It also runs various contests and other events related to NBC-TV shows.
Job Cuts
NBC Internet said it will start eliminating jobs as part of a January plan to reduce costs. The company has trimmed its workforce to about 300 from more than 800 last year.
Most remaining jobs likely will be eliminated, Chief Executive Will Lansing said in an interview. NBCi's San Francisco headquarters and New York offices will be shut, he said. Remaining jobs will be moved to NBC's offices in Burbank, California, and New York, he said.
NBCi's fourth-quarter loss widened to $245 million, or $3.89 a share, from $68.2 million, or $2.18, in the year-earlier period. Revenue almost doubled to $31 million. The company, had it remained intact, would probably miss its goal of $100 million in revenue this year, Chief Financial Officer Tony Altig said on a conference call with reporters and analysts.
Ad sales on the Internet have declined as growth of the economy has slowed and many Internet companies reduced their own ad spending.
Sponsorships
NBCi sold sponsorships for sections of its Web site for tens of millions of dollars last year, Lansing said. Now, they sell for hundreds of thousands.
Also, companies that conduct most business without using the Internet were slow to buy ads on line.
"The traditional advertisers really aren't getting a great deal of payback from their Internet ad buys,'' Begor said on the call. "We were having a great deal of difficulty moving more of their money from the screen to the Internet.''
NBC hopes demand for Web advertising will increase when fast Internet connections are more widely available, said Marty Yudkovitz, president of NBC's digital media division. Then the network will be able to produce online ads similar to TV commercials.
The NBCi Web site will be scaled back, Lansing said, to focus on promoting the NBC network and the cable networks NBC owns. It is likely to keep its search function and links to NBC.com, the MSNBC.com news site and the CNBC.com financial news site, he said. Scott Sassa, president of NBC's West Coast operations, will oversee NBCi.
Other Sites Consolidated
Other media companies have been combining their Internet operations. Walt Disney Co., owner of the ABC network, folded its Disney Internet Group into the company earlier this year. Viacom Inc., which owns CBS, and News Corp.'s Fox Entertainment Group Inc., owner of the Fox network, scaled back Internet plans last year.
The NBC TV network is No. 1 among adults under age 50. The company also owns the CNBC and MSNBC cable channels.
"NBCi had the cherished NBC name out there being used in a fairly inefficient and under-appreciated manner,'' Newman said.
Apr/09/2001 16:26 ET
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