This was one of the most transparent old-media attempts to polish the brass on the Titanic, and it deserves to die.
Monday April 9 12:45 PM ET NBC Is Shutting Down NBC Internet
By SETH SUTEL, AP Business Writer
NEW YORK (AP) – NBC is shutting down its loss-ridden Internet subsidiary, acknowledging that any hopes of it becoming profitable had vaporized along with the online advertising market. Many of the 300 jobs there will be eliminated as the unit’s assets are integrated into NBC.
The announcement Monday marks the latest move by a major media company to drastically scale back its Internet ambitions. The Walt Disney Co. and News Corp. have also absorbed their online units, and other media players have pulled plans to sell shares in their online operations to the public.
Senior executives at NBC and NBC Internet told The Associated Press that they had been weighing alternatives for the subsidiary since the beginning of the year, including a sale, a merger with another company, or liquidation.
“The sharp declines in the Internet advertising market convinced us that it didn’t make sense to pursue a portal strategy,” NBC’s chief financial officer Mark Begor said. “We wanted to find a way to maximize shareholder value and wind down the business in the best way possible.”
Like many companies that rely on online advertising, NBC Internet has been losing a staggering amount of money. In the three-month period ending in December, it posted a net loss of $245 million on revenues of $31 million. Excluding asset write-downs or restructuring charges, it would have lost $47 million for the quarter.
NBC, a subsidiary of General Electric Co., will pay $2.19 in cash for each publicly held share of NBC Internet, a premium of 46 percent over the closing share price of $1.50 on Friday. NBC currently owns 39 percent of the company, which was formed in the fall of 1999 in a multipart deal with CNET and other Internet companies.
Shares of NBC Internet jumped 64 cents to $2.14 in early trading Monday on the Nasdaq Stock Market. Shares of NBC’s parent company GE rose $1.19 to $42.36 on the New York Stock Exchange.
NBC Internet’s assets will be absorbed back into NBC, but it’s not yet clear how they will be used. The NBC.com Web site will fall under the jurisdiction of Scott Sassa, the chief of NBC’s West Coast operations.
Still to be determined are the fate of some dozen companies, such as Flyswat, GlobalBrain or AllBusiness, that NBC Internet acquired for stock over the course of a $500 million buying binge.
“There’s no question that we’ll dramatically reduce the scope of the operations and sell some assets,” said NBC Internet’s chief executive Will Lansing. “But first we’ll see how it fits into the NBC strategy.”
The purchase will cost NBC about $85 million in cash and places a value of about $150 million on the Internet subsidiary. That’s a far cry from the roughly $5.7 billion value that investors assigned to NBC Internet back in January 2000, when its shares closed at a high of just above $100.
NBC has been trying to turn around its Internet subsidiary for some time. Last year it installed Lansing, a former GE executive, to implement fiscal discipline and revamp the company’s blurred marketing strategy, which employed a number of different brands and Web sites such as Snap and Xoom.
NBC Internet has been trimming its payrolls over the past nine months from a high of 850 last August to 300 now. Begor said NBC would “significantly reduce” the head count as NBC Internet is integrated back into the network, but he declined to be more specific.
Despite backing from the NBC network, including $220 million in advertising credits, NBC Internet had always struggled and didn’t get to share the success of NBC’s strong cable brands MSNBC and CNBC.
MSNBC.com remains one of the top news sites on the Internet, but that site, like the cable channel it is associated with, is a 50-50 joint venture between NBC and Microsoft and was never part of NBC Internet. Likewise the Web site for CNBC, which has been a runaway hit on cable with its financial coverage, had only a minor participation in NBC Internet.
Lansing will leave the company after seeing it through a transition period. The deal is expected to close in the summer.