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Excite pulls the plug on Netscape deal

The company may find itself a little richer and wiser come June 17, when it cancels its closely watched $70 million deal with Netscape Communications' Netcenter portal.

Excite may find itself a little richer and wiser come June 17, when it officially cancels its closely watched $70 million deal with Netscape Communications' Netcenter portal.

The portal may receive a refund of up to $45 million, depending on settlement costs for the amount it prepaid for distribution and trademark costs to Netscape, according to Excite's filing today with the Securities and Exchange Commission.

When Excite entered its multimillion-dollar deal with Netscape, many industry watchers were amazed at the price the portal was willing to pay to enter a deal with Netcenter. Under the two-year agreement, Excite was to power the Netscape-branded search engine and be featured for 25 percent of the rotations on the Netscape search page.

Some analysts at the time were skeptical that Netcenter's traffic would continue to grow in light of the growing popularity of Microsoft's Internet Explorer browser. Many attributed Netcenter's abundant traffic to its status as the default page for users of Netscape's Navigator browser.

But as Navigator lost market share to IE, analysts feared Netcenter's traffic also would decline. Others questioned whether Excite would be left with the short end of the deal--paying a sizable chunk of change while helping Netcenter grow into a media business.

Although Excite said it plans to terminate its deal because rival America Online has since acquired Netscape, the portal noted in its regulatory filing that the deal did not live up to its original expectations.

"The actual delivery of impressions since the launch of the Netcenter cobranded service in June 1998 has been significantly below expectations," the filing said. "During the first quarter of 1999, Excite Search and the cobranded Netscape Search services benefited from increases in search rotation, however, those improvements were temporary and impressions continued to fall short of original expectations."

Excite does not expect revenue from the Netcenter cobranded services to exceed 10 percent of the company's total revenues during the term of the contract. Last year, Excite generated $154.1 million in revenue.