WSJ:
Rebuffed by Excite, Zapata
Launches Own 'Portal' Site
By LISA BRANSTEN
THE WALL STREET JOURNAL INTERACTIVE EDITION
SAN FRANCISCO -- Zapata's stock more than doubled after the
fish-protein company announced an audacious plan to launch its own Web
portal site.
Two months ago, Zapata made a splash with
its bid to acquire Excite for $1.7 billion, about
five times Zapata's own market value.
Rebuffed in that effort, Monday the company
announced that it had added 21 small Web
properties to the two it already owned. The
company also said it planned to spin off its
Internet operations into a separate, publicly
traded company, Zap Inc., and that its board had approved the
repurchase of as many as five million shares.
Investors responded to the slew of news with the same alacrity that they
have shown toward any company choosing to stick the word Internet
somewhere in its business plan: They bid the stock up 10 5/8 to 20 1/2 in
afternoon trading on the New York Stock Exchange.
Meanwhile, the Nasdaq Composite Index was up 12.60 to 1906.60, and
Morgan Stanley's high-tech 35 index was up 8.60 to 605.
To be sure, Zapata showed great timing, announcing the deals on a day
that Lycos jumped 17 1/16, or 22%, to 96 1/8 on Nasdaq just because it
said it will split it stock. But despite snickers on Wall Street and Silicon
Valley, the jump Monday in the stock left it at its highest level ever.
In April, the shares jumped to a 52-week high of 15 3/8 after investors
gave a warm reception to the company's spinoff of Omega Protein, its
fishmeal unit, but since then shares had drifted back down towards $10.
Lise Buyer, an analyst at Credit Suisse First Boston, was skeptical about
the huge valuation that investors applied to Zapata's stock.
But elsewhere, there was some newfound interest in the company's plans.
Allen Weiner, an analyst at San Jose, Calif., market-research firm
Dataquest, compared the strategy to that of a venture-capital firm: If two
or three of the sites become very successful enough the company as a
whole could be a winner.
The biggest question, Mr. Weiner said, is whether the company has the
right combination of management skills to move from running a food
products and packaging company to running a Web company.
"The right mix would be people who bring traditional business practices
and enough young, forward-thinking visionaries," he said. "We don't know
whether Zap has that, and we'll find that out in the living, breathing
marketplace."
Avram Glazer, Zapata's chief executive officer, said he believes his
company has better traditional management skills than many other Web
companies.
"I had never heard the word 'burn rate' before and we don't think that
way," he said, referring to the common Silicon Valley term for the pace at
which technology companies spend capital.
Mr. Glazer wouldn't disclose how much Zapata paid for the 21 new sites,
but he did say most were profitable, unlike the majority of Internet
companies. The plan is to create a portal site that, instead of sending
visitors on to other sites as Yahoo!, Excite and others often do, keeps
them by amassing a network of interesting content sites.
Among the sites purchased recently are two
stock sites, an old and rare bookselling site,
a seller of imported and hard-to-find music
and a site that has libraries of clip-art. In
April, Zapata acquired the defunct zines
Word and Charged, though neither has yet
been relaunched.
"We want to be not only the beg site people
go to on the Internet, but also the end site," Mr. Glazer said. His goal is to
be among the top two biggest Web sites, but he has a long way to go.
In May, the sites just acquired by Zapata had total traffic of about
587,000 unique users, or a reach of about 2% of all people who used the
Internet, according to figures provided by MediaMetrix. That compares to
the 43% reach of Yahoo's Web sites.
Monday's Market Activity
Elsewhere in the technology sector Monday, Structural Dynamics
Research lost 4 9/16, or 21%, to 16 13/16 on Nasdaq. The developer of
computer-aided design software for auto makers and other companies
said Monday it expects second-quarter earnings and revenue to fall far
below expectations as a delayed order for its software hurt North
American sales (see article).
Verisign was up 2 to 43 1/2 on Nasdaq. VeriSign said it acquired
SecureIT Inc., a privately held provide of Internet-related security
services, for about 1.67 million shares of VeriSign common stock (see
article).
NetManage fell 15/32, or 15%, to 2 23/32 on Nasdaq. The provider of
computer connectivity systems warned late Thursday that it expects to
report second-quarter revenues of $13.5 million to $14.5 million. The
company said the results reflect significant softening in international orders.
For the second quarter in 1997, NetManage posted a loss of 10 cents a
share, on revenue of $12.7 million.
Creative Computers rose 2 3/8, or 32%, to 9 3/4 on Nasdaq after the
Thursday filing by uBid, a subsidiary, for an initial public offering of 1.58
million of common shares. uBid operates an on-line auction. Following the
IPO by uBid, Creative Computers will own 82.3% of uBid's outstanding
common shares. Based in Torrance, Calif., Creative Computer markets
computers and computer peripherals. |
