Two years after paying $7.8 billion in cash and stock for Excite.com, parent company Excite@Home has agreed to sell its money-losing Web portal for a mere $10 million.
In a complicated three-way deal that must be approved by a bankruptcy court judge, the Excite portal will wind up in the hands of iWon, a rival that uses contests to draw Web traffic. Search technology company InfoSpace, which is making the actual $10 million bid, will hand over the assets to iWon and then manage search and directory services on the new Excite site, according to an InfoSpace spokesman.
The purchase price for Excite is equal to the amount that iWon pays for its annual grand prize, which it has distributed twice. In total, the site has given away close to $50 million to its visitors.
Excite@Home, which filed for bankruptcy protection last month, said it would retain technology assets and employees for use in its high-speed Net business.
The proposed sale of Excite's assets must be approved by the bankruptcy court, meaning other companies could make competing bids.
The company's "request to sell portions of Excite@Home maps to our continued focus on broadband, including a continued offering of content and services on the broadband portal to @Home subscribers," a spokeswoman said.
With the fire-sale price of just $10 million, the deal makes clear just how radically the Internet --and its most prominent companies' valuations--have changed in the past year.
Excite is a second-tier portal with a much lower profile than rivals
What went wrong for Excite@Home
Cynthia Brumfield, principal analyst, Broadband Intelligence
August 31, 2001
Still, the Excite@Home merger made it more clear than almost any other deal that traffic and ambition couldn't build a profitable business alone.
One of the most high-profile mergers in Internet history when it was announced in 1999, the creation of Excite@Home proved to be doomed from that start. The two brands were difficult to mesh, and internal confusion over direction kept the new company veering between business visions for more than a year.
Once a Web powerhouse, Excite began a long slide. The company tried to keep boosting traffic with new deals, including a nearly $1 billion agreement to buy digital greeting-card company Blue Mountain Arts, which had millions of visitors but no revenue. Excite@Home sold Blue Mountain Arts last month to American Greetings for $35 million in cash.
Meanwhile, the company was running into trouble with the cable companies that controlled it. AT&T in particular had little patience for the content business and bitterly criticized @Home executives' moves toward Net content.
After a long, steep stock slide, Excite@Home finally filed for bankruptcy protection Oct. 1. It agreed to sell its cable Internet access business to AT&T for $307 million, which immediately sparked controversy among parties who held more than $1.3 billion in company debt.
Bondholders are opposing that sale, hoping to persuade AT&T or another party to pay more than the $307 million now on the table.
Details of the deal between InfoSpace and iWon were not immediately available. An InfoSpace spokesman said that iWon would pay part of the $10 million purchase price.
InfoSpace already provides search or directory services for many of the major Web portals, including those run by AOL, Microsoft, NBC, Disney and Lycos.