NBC To Absorb Faltering NBCi

The US$138 million deal reflects the woes of the overall Internet portal industry, which has been hit hardest by the slumping market for online advertising .

"Recent changes in the portal space and the Internet advertising market have caused us to reexamine this initiative," said Bob Wright, president of NBC and vice chairman of NBC parent company General Electric (NYSE: GE).

Looking it Over

Wright said NBC would take "several months" to evaluate the Internet properties and decide how to utilize them as part of the parent company. The deal is expected to close sometime this summer.

"Today's declining market conditions in the Internet space have made it difficult for NBCi to remain competitive," said Will Lansing, NBCi chief executive officer. "This was a hard decision, but in the end we have determined that this course of action is best for the company's public stockholders."

The move to blend NBCi back into NBC marks the end of an experiment that began with high expectations in November 1999, when NBC started a dot-com buyng spree. After scooping up Web properties such as Snap.com and Xoom.com, NBC consolidated the properties and spun off NBCi.

Losing Value

Lansing noted that "only top-tier portal services are even close to being profitable."

While NBCi has seen its usage climb steadily in recent months, it has remained far behind the leading portals, America Online, MSN and Yahoo!

Attempts to move further into the e-commerce world as a provider of platforms through a partnership with BigStep.com, announced in July, were also unveiled. Yet, NBCi continued to lose money quarter after quarter.

"Rather than continuing to operate at a significant loss, and having the value of NBCi continue to erode, we believe this transaction is in the best interest of NBCi's public stockholders," Lansing added.

Paying a Premium

The deal may provide a glimmer of good news for shareholders of San Francisco, California-based NBCi. Like many tech stock owners, they saw NBCi shares climb above the $100 plateau early in 2000, only to begin a steady and then steep decline to less than $1 per share.

NBC, which owns about 39 percent of the company already, said it will pay US$2.19 for each share of NBCi stock. That's a 46 percent premium over the stock's closing price on Friday of $1.50. CNET also owned a stake in NBCi.

More Layoffs

In January, NBCi said that it would cut 150 jobs from its interactive division in a bid to gain profits. At the time, the portal said it might be able to achieve profits either late this year or early next.

However, that assertion was questioned by some analysts, who said that NBCi showed no signs of approaching profits.

As part of the merger, NBCi will "immediately begin reducing the size of its workforce," the company said. No further details were provided on how many jobs might be lost in the merger.