Yikes!! Just when you thought it was safe and the Internet craze was winding down we have this. GE will now get in to this cash cow arena. Justa, can Justabid.com be far behind? <gg> Jeff
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Technology News
Mon, 10 May 1999, 8:27pm EDT
GE to Create Public Internet Unit Through NBC Unit (Correct)
By Rachel Layne
GE to Create Public Internet Unit Through NBC Unit (Correct)
(Corrected by Cnet Inc. The 13% stake mentioned in 2nd
paragraph will be held only by Cnet option holders.)
New York, May 10 (Bloomberg) -- General Electric Co., the
second-biggest U.S. company by market value, said it will combine
some Internet holdings of its NBC broadcast network to form a
publicly traded company in a move to capture the high prices
investors are paying for Internet properties.
GE will own about half of NBC Internet, or NBCi. The NBC
Internet businesses will join those of Xoom.com Inc., an online
direct-marketing company, and Snap.com, the online directory that
NBC owns with Cnet Inc. Cnet option holders will own a 13 percent
stake and Xoom.com will own 34 percent.
GE Chairman John F. Welch Jr. said in December that NBC
might spin off some of its Internet businesses in part because of
the money they would fetch. As U.S. television networks lose
viewers to the Internet, NBC wants to use its brand name to draw
an audience in the growing medium, part of Welch's drive to
increase GE's sales through the Internet and electronic commerce.
''GE can't afford not to be there,'' said Ann Winblad,
partner at Hummer Winblad Venture Partners, a nine-year-old San
Francisco-based firm that invests in technology startups. ''They
need to bring the culture inside -- that you don't just sell to
customers or advertise to them, you try to have a more
substantial, all-encompassing relationship with them.''
Shares of San Francisco-based Xoom.com rose 6 3/4, or
9 percent, to 81 7/8. Cnet, also based in San Francisco, jumped
22 7/16, or 20 percent, to 136 3/16. GE shares fell 1 3/16 to
108 3/4.
Advertising Boost
Fairfield, Connecticut-based GE will own 49.9 percent of the
company and will have the option to raise its stake to 53
percent. NBCi also will include NBC.com and a 10 percent
ownership stake in the new CNBC.com.
NBCi will acquire $380 million in NBC television network
advertising in the next four years and it has targeted an
additional $500 million in advertising in the following six
years.
NBCi will operate a Web site under the Snap.com brand name,
which it said will be the seventh-largest Internet site. NBCi
also will be the first publicly traded Internet company
integrated with a major broadcaster. Financial terms weren't
disclosed. NBC already owned 60 percent of Snap.com, while Cnet
owned 40 percent.
NBC President Bob Wright will be chairman of the NBCi and
Chris Kitze, Xoom.com's chairman, will be NBCi's chief executive
and president. NBC will have six of 13 NBCi board members.
Alexander Cheung, a portfolio manager with Bethesda,
Maryland-based Monument Internet Fund, which owns shares of Cnet
and Xoom.com, said all the parties will benefit because they have
little overlap right now.
''They have a unique opportunity for some cross-
fertilization,'' Cheung said. ''The three of them can be a very
powerful force in electronic commerce.''
NBC is among an increasing number of companies that want an
online business model that combines advertising and commerce.
Last year, about 60 percent of Xoom.com's revenue came from
e-commerce, whereas Snap.com and NBC.com got 100 percent of their
revenue from advertising, Kitze said.
Xoom.com Shares
Once approved by Xoom shareholders, NBCi will trade using
existing Xoom shares, NBC said in a conference call with
reporters. MSNBC.com, NBC's joint venture with Microsoft Corp.,
won't be a part of NBCi, NBC said.
''If anyone wants to invest in this entity now, Xoom is the
way to do it,'' Tom Rogers, president of NBC's cable division,
said on the conference call.
Xoom, Cnet and NBC officials estimate NBCi will have 1999
revenue of at least $60 million, double what Xoom.com had
projected alone for 1999.
''It's a way to do it without putting up a lot of new money
and, from GE's standpoint, that was important,'' said NationsBanc
Montgomery Securities analyst Russell Leavitt, who has a ''buy''
rating on GE.
The move also is a response to tougher times in the network
television business, analysts said. The lack of profit at most
Internet companies also is motivating GE to set a separate
company, analysts said.
''GE wouldn't want to suffer dilution as they build up their
Internet initiatives,'' said Vinton Vickers, an analyst at ING
Barings. ''This allows them to establish a currency and investor
base that won't look adversely on these (Internet) investments.''
The transaction is expected to be completed by the end of
the year, NBC said.
Bear Stearns & Co. advised Xoom. BT Alex. Brown Inc. advised
Cnet and Snap. NBC didn't have an adviser.
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