UPDATE 1-InfoSpace to buy Go2Net for $4 billion in stock
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By Duncan Martell
PALO ALTO, Calif., July 26 (Reuters) - InfoSpace Inc. (NASDAQ: INSP), which syndicates content to Internet portals and wireless companies on Wednesday agreed to buy Go2Net Inc. for about $4 billion in stock, giving InfoSpace technology to process online payments and deliver interactive games.
Four-year-old InfoSpace already provides national Yellow and White Pages directories, maps, classified ads, live music event and TV listings, news and stock quotes.
With Go2Net -- Microsoft co-founder Paul Allen owns 30 percent of the company -- InfoSpace also adds the ability to deliver interactive games over cable and DSL modems, as well as search services and financial information.
Executives from both companies said on a conference call that the combined companies will enable customers to deliver soup to nuts technology and services to provide news and information over the Internet to both wired and wireless devices and will eventually allow a consumer to purchase a garment over the Internet seen on a television show from his sofa. They said the deal would add to earnings "from day one."
"By integrating these two companies, InfoSpace will be uniquely positioned to speed the development of the interactive medium from wireless to DSL to broadband -- and the growth of all our businesses," said Naveen Jain, InfoSpace's chairman and co-founder, who is a veteran of Microsoft Corp.'s online services unit.
Bellevue, Wash.-based InfoSpace said that under the deal, expected to close in the fourth quarter, it will issue 1.82 of its own shares for each Go2Net (NASDAQ: GNET) share. As of July 17, when it reported third-quarter earnings, Seattle-based Go2Net had 46.2 million shares outstanding.
The deal values each Go2Net share at $86.91, a 43-percent premium to Go2Net's closing price on Wednesday of 60-9/116 on the Nasdaq, where it fell 1-9/16. InfoSpace stock rose 1-7/16 to 47-3/4 on the Nasdaq.
Go2Net runs a stable of Websites including 100Hot, a Web site ranking service; Authorize.Net, a payment processing service; Dogpile, search services; Haggle Online, online auctions; andPlaySite, multiplayer games, among others.
But recently the company has been touting the technology behind these sites and selling those services to customers. Go2Net now says that the majority of its sales comes from licensing and transaction-based commerce.
"This will create the industry's premier global infrastructure company" for delivering Internet content," said Russell Horowitz, Go2Net's chairman, chief executive and co-founder on the conference call.
InfoSpace also had its beginnings as a portal but has turned more toward providing the nuts and bolts Web site operators and wireless companies need to provide news and information, both on handheld devices, Web-enabled mobile phones and PCs. It also said it has an 88 percent share of the U.S. market for technology that allows Web phones to serve up news, stock quotes and other information.
Now, once the deal goes through, InfoSpace aims to go after the fast-growing broadband market, which includes DSL and cable modems and, in some cases, satellite connections, Jain said on a conference call with analysts.
By 2004, some industry analysts peg the number of gizmos connected to the Internet to surge 10-fold to more than 2 billion. Of that, Go2Net believes that more than one-third of those devices will have super-fast access to the Internet, including PCs, TVs and wireless devices.
Separately, InfoSpace reported a far-narrower-than-expected pro forma loss of $3.3 million, or a penny a share, compared with a year-ago pro forma loss of $4.30 million, or 2 cents a share. Sales more than tripled to $24.6 million from $6.98 million.
On that basis, Wall Street had expected the company to lose 6 cents a share in the quarter, according to consensus analyst estimates compiled by First Call/Thomson Financial, which tracks such forecasts.
Including the one-time items, InfoSpace said its loss widened to $31.2 million, or 14 cents a share, from $9.86 million, or 5 cents, a year ago. |
