Here's the WSJ article on Infoseek:
June 8, 1999
Tech Center
Disney Discusses Buying All of Infoseek
As Internet Chief Winebaum Quits Post
By BRUCE ORWALL and KARA SWISHER
Staff Reporters of THE WALL STREET JOURNAL
Walt Disney Co.'s halting journey to the Internet took a couple of new twists, as the entertainment company disclosed it is in negotiations to consolidate ownership of a key online partner while the chief of its Internet operations is resigning.
Disney confirmed it has entered discussions to acquire the 57% of Infoseek Corp., Sunnyvale, Calif., that it doesn't already own. Infoseek is Disney's partner in the recently launched Go Network Internet portal (www.go.com3). Disney has for several months been in discussions to take control of Infoseek as a means of consolidating its fractured Web operations. Monday, it said one option being considered is a transaction in which it would acquire the remainder of Infoseek in exchange for shares in a new Disney tracking stock.
Infoseek's stock surged. In after-hours trading, it rose $8 to $51, according to Instinet, following a rise of $6.3125, or 17%, to $43 in Nasdaq Stock Market trading. Disney stock rose 25 cents to close at $30.875 in New York Stock Exchange composite trading.
At the same time, the chief architect of Disney's Internet strategy, Jake Winebaum, has resigned to form a Web company with EarthLink Network Inc. Chairman Sky Dayton. Mr. Winebaum's move from Disney to a start-up firm, where the potential financial rewards are much greater, underscores the difficulty established companies face as they try to keep top Internet employees.
Some analysts said the possible restructuring, combined with Mr. Winebaum's departure, amounts to starting over for Disney -- which they said isn't a bad idea. "Since they haven't made much visible progress, they might as well start from scratch again and see if they can get it right," said Lise Buyer, an analyst at Credit Suisse First Boston Corp. "They've learned a lot from their efforts, and now it's time to go into high gear."
Mr. Winebaum, 39 years old, was chairman of Disney's Buena Vista Internet Group and has for the past four years been Disney Chairman Michael Eisner's key deputy on Web-related matters. Mr. Winebaum joined Disney in 1992 after he sold several magazines to the Burbank, Calif., company. In addition to overseeing Disney's purchase of a 43% stake in Infoseek last year, he has proselytized to other units of the company about the coming importance of the Internet. Though Disney has long touted Mr. Winebaum as its Web visionary, the company told analysts Monday that his loss was minimal because the company thinks he is better at starting organizations than building them.
Disney and EarthLink, a Pasadena, Calif., Internet-service provider, both will have an unspecified stake in the new venture that will be formed by Mr. Winebaum and Mr. Dayton, 27. It is called eCompanies and is described as an "Internet incubator" that will develop and invest in Internet start-ups. Other companies, such as idealab, also based in Pasadena, and CMGI Inc., Andover, Mass., have recently had success doing the same thing.
Acquiring the rest of Infoseek could be costly, especially since the company continues to accumulate big operating losses as it expands its business. With the surge of the past two days, Infoseek has a market capitalization of about $3.15 billion, not including certain stock options. To pay a premium, Disney's cost of acquiring the remaining 57% interest would likely exceed $2 billion. Disney stressed that neither company has determined whether to proceed with a transaction.
By contrast, Disney bought its 43% stake in Infoseek a year ago in a deal that included $70 million in cash, handing over control of Disney's Starwave unit (which was valued at $350 million) plus $139 million in warrants to take majority control of Infoseek after three years.
Mr. Winebaum said his departure was motivated by the chance to be an entrepreneur again, as he was earlier in his career. "My passion is again starting from scratch with one or two employees and being an owner," he said. He added that Disney's investment in his new company will give the huge entertainment company the opportunity to grab a stake in gestating Internet firms.
With Mr. Winebaum departing, Disney tried to stress management continuity by promoting several executives at its Buena Vista Internet Group, which operates the company's Disney Online and Disney.com units (www.disney.go.com4). The new team is headed by Steve Wadsworth, 36, who becomes president of Buena Vista Internet Group. He was formerly senior vice president and chief financial officer.
While Mr. Winebaum has been at the center of Disney's Internet activities, some analysts say not all has gone well. They don't quibble with the strategy but note that ventures such as the launch of Go Network have sometimes had a lackluster impact.
Another problem has been unclear lines of authority. Because Disney owns a major chunk of Infoseek but doesn't have full control, management decisions have been convoluted and slow-moving, compared with those of more nimble rivals. Assuming full control of Infoseek might resolve some of these conflicts.
If Disney does make a deal to buy the rest of Infoseek, one idea it has considered involves packaging its own Internet assets together with Infoseek in a tracking stock. J.P. Morgan analyst Richard J. MacDonald put a value of about $7 billion on a stock that would include all of Disney's Internet interests combined with 100% of Infoseek at current values.
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Hyperlinks in this Article:
(1) interactive.wsj.com
(2) interactive.wsj.com
(3) go.com
(4) disney.go.com
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