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CompuServe overhauls service

In the midst of a search for a new owner, CompuServe undertakes a major redesign.

In the midst of its search for a new owner, CompuServe (CSRV) has announced a major redesign of its online service.

CompuServe is reorganizing its popular online forums for the United States market into 21 "menu-driven" communities. At other services, those communities would probably be called by the most common name in the Internet lexicon these days: channels.

In a separate announcement, Cisco Systems said today that it is delivering 56-kbps modem technology to CompuServe for "extensive field testing." CompuServe is committed to delivering the technology to more than 1,000 corporate customers, said Janel Crabtree, group manager for managed network services at the online service.

Analysts applaud the redesign, to be launched tomorrow, saying it could help CompuServe's approximately 2 million U.S. users find forums and areas they now miss. But they also are quick to point out that this effort is being undertaken at an extremely difficult time--to put it mildly.

In November, the company announced that it was abandoning its mass consumer service; in February, its CEO left; and earlier this month, the company acknowledged that it is shopping for a buyer. All this comes on top of poor earnings and the stated goal of H&R Block to sell off the remaining 80 percent of CompuServe that it still owns.

"CompuServe is really a struggling company right now," said Peter Krasilovsky, an analyst with Arlen Communications. "The biggest issue is that CompuServe is preparing a relaunch in the midst of corporate uncertainty."

CompuServe executives acknowledged today that the company is being shopped around but said any new buyer would want to keep the service in tact.

While analysts wondered about the effect this revamp would have on the service, they also conceded that the company had to do something to change.

"They need an overhaul," said Kate Delhagen, an analyst with Forrester Research. "They're extraordinarily slow in a fast-moving market."

CompuServe executives said the reorganization will help the service better target its primary audience: the business and technical users who want to use one service for work and play.

In November, when CompuServe announced its last major reorganization, executives had discussed launching new products specifically geared toward businesses. Since then, market research has shown that the targeted small and medium-sized businesses didn't necessarily want a separate service for their work needs, said Scott Kauffman, vice president of interactive services.

So CompuServe decided instead to expand its existing service to fulfill all their needs.

And it just might work. While no one will dispute that CompuServe is in big trouble, they point out that it serves its core users well with strong business forums and excellent connectivity.

The challenge now is to keep their existing business costumers interested while trying to attract new ones who will make online purchases and provide attractive demographics to advertisers.

The company is also standardizing content to make it accessible through any Web browser. Within 90 days, the company expects to announce partnerships with at least two major Internet service providers--Earthlink and AT&T WorldNet--to link Internet access with CompuServe's content.

By the end of the year, Kauffman said, that material should be completely accessible over the Web. While other companies have made hasty decisions that have sometimes backfired, he said, CompuServe is "making intelligent business decisions."

Few are writing the company off. After all, it still is among the four largest online services.

"If they can maintain much of the business market, they can be an interesting content site on the Web and people will pay good money for that," Delhagen said.

Internet editor Jeff Pelline contributed to this report.