NBC Forms Internet Division

In a major move to combine content, community and e-commerce, NBC announced Monday that it is partnering with leading e-commerce direct marketing company Xoom.com (Nasdaq: XMCM) and online technology network CNET (Nasdaq: CNET) to create a publicly traded Internet company known as NBC Internet.

Bob Wright, president and CEO of NBC will become the chairman of the board for NBC Internet, which will also be known as NBCi. Chris Kitze, the chairman of XOOM.com, will become president and CEO of NBC Internet. Snap.com will be the anchor site of the new venture.

“Integrating NBC’s content and promotional strengths with Xoom.com’s expertise in direct e-commerce and Snap.com’s navigational strengths will result in a unique online company that will stand out in the crowded Internet world,” Wright said.

NBCi Expects 18 Million Unique Users

NBC will merge several of its Internet assets with Xoom.com and Snap.com, which is owned by both CNET and NBC. However, NBC’s daily news site MSNBC.com, which is a joint venture with Microsoft, is not part of the deal. The new company expects to create the seventh-largest Internet site on the Web, based on the eyeballs the various Web properties already are getting now.

The new site will be NBC’s “exclusive general portal/community/e-commerce Internet commitment,” and NBC Internet expects to attract more than 18 million unique users each month. Snap.com currently is the 11th most popular Web site, with 9.75 million unique users per month, according to Media Metrix. Xoom.com is No. 12, with 9.69 million unique users per month.

“NBCi will be a pure Internet play that will maximize Xoom.com’s direct e-commerce platform. We have built two strong revenue streams in e-commerce and advertising and have proven that we can convert Internet users into buyers,” Kitze said.

Terms of the Deal

After the merger, NBC will own a 49.9 percent stake in NBC Internet and will name directors to six of the 13 board seats. The merger is expected to be completed by the end of the year. NBC will also purchase a convertible debt instrument that could result in controlling interest in the venture. If the debt instrument is converted, NBC would own 53 percent of NBC Internet, CNET would own about 13 percent, and Xoom.com shareholders and option holders would own the rest of the company, approximately a 34 percent stake.

The new company, which will include NBC’s video-on-demand service Videoseeker.com and own a 10 percent stake in CNBC.com, will be heavily promoted offline. NBC Internet has made a deal to acquire $380 million (US$) in NBC television advertising over the next four years, with an additional $500 million targeted in advertising for the following six years.

Stock Impact

Shares of NBC parent company General Electric closed down 1-3/16 to 108-3/4 on Monday, but investors overall are euphoric about the deal, with shares of Xoom.com and CNET rising significantly. Xoom.com climbed nine percent, rising 6-3/4 to 81-7/8. CNET stock, meanwhile, rocketed nearly 20 percent, climbing 22-7/16 to 136-3/16.

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