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Mindspring in talks about &#039possible business combinations&#039

Tech Industry

Mindspring Enterprises Inc. (Nasdaq: MSPG) said Thursday it is in discussions regarding "possible business combinations."

In a statement, Mindspring didn't mention any potential suitors, but said it is "considering the possible combinations and other alternatives."

The company also said it won't comment further unless the talks result in a definitive deal.

Mindspring shares have been volatile of late on reports that Gateway Inc. (Nasdaq: GTW) and Earthlink Inc. (Nasdaq: ELNK) were in talks about a possible merger. Gateway is looking to get a recurring revenue stream from its customers and wants to offer online services.

However, Sprint owns a 20 percent stake in Earthlink and could complicate the company's discussions with Gateway. Since Mindspring and Earthlink are very comparable companies, speculation is rampant that Gateway could also be talking to Mindspring. Other press reports have stated Microsoft (Nasdaq: MSFT) is interested in an Internet service provider for its MSN online service, which is way behind America Online Inc. (NYSE: AOL) in terms of users.

The Mindspring has a market capitalization of $2.4 billion.

The Gateway-Earthlink rumor appeared on Internet chat rooms and gathered steam after CNBC on Tuesday reported the talk was moving EarthLink's shares. On Wednesday the Wall Street Journal, quoting people close to the situation, reported that the two companies were in early merger talks. The newspaper said financial terms had not yet been discussed.

Alex Cheung, portfolio manager of the Monument Internet Fund, said Gateway's potential bid for Earthlink could raise problems. "I'm not sure Gateway should run an ISP (Internet service provider)," he said. "They are two very different businesses and ISPs need a lot more in front-end investment."

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