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NBCi plunges on profit warning, downgrades

NBCi (Nasdaq: NBCI) said Tuesday that second quarter revenue will be in line with the first quarter, but earnings will be about 10 cents a share to 15 cents a share lower than consensus estimates.

Shares were down 37 percent, or 9 1/16 to 15 9/16 Tuesday morning, following a conference call in which the portal elaborated Monday's restructuring and profit warning.

NBCi said on the call that it now expects sales of $135 million for fiscal 2000, or an impact of 75 cents a share to the bottom line. The company said it would have met estimates excluding the acquisitions of Flyswat and Allbusiness.com. Second quarter sales will be around the $30 million reported in the first quarter.

The stock also got a round of downgrades following the call. Goldman Sachs lowered the stock from "trading buy" to to "market outperform," Gruntal & Co from "near term outperformer" to "near term market performer," Deutsche Ban c Alex. Brown from "buy" to "market perform" and Robertson Stephens from "buy" to "long term attractive."

At the time of the company's merger with Snap, it had decided to use the Internet company's logo, and leverage it with the "power of the Peacock." Now, after studying market research, the company has decided to create a new integrated look, which will include all of NBCi's consumer portal, utility and entertainment properties -- including Snap.com and Xoom.com -- in a single NBCi.com offering, expected to launch in the fall.

On the conference call, NBCi also detailed plans to "tighten" its cost structure to turn a profit in 2002. The company had originally planned to increase its headcount to 1,000, but will now level it off at 780; it also said it will look at "marginal areas" of its business and assess whether to continue.

In response to questions from analysts as to how the company's portal would set it apart from competitors -- which include established player such as Yahoo! (Nasdaq: YHOO), America Online (NYSE: AOL), Lycos (Nasdaq: LCOS) and Disney's Go.com (NYSE: GO) -- NBCi's Chief Executive Officer, William J. Lansing said the site would offer a more "personalized" experience.

"Both Yahoo, Snap and NBCi outsource their search function to Inktomi (Nasdaq: INKT) -- one would expect identical results.... but we have a more relevant search engine than anyone else," Lansing said, citing the company's data mining practices which are used to further sort results.

The company said it now expects to be profitable in 2002 - a couple of quarters later than it had expected, partly due to the integration of Flyswat.

NBCi blamed the market environment for the change in its financial outlook. Lansing said that has changed the company's timeline; "the dot-com world has changed - in the short-term, we're not going to be doing spin-offs. But that's not a reflection on quality of business."

Lansing said there has been a change in the nature of advertising revenue, and NBCi won't be booking much more of revenue from dot-coms. NBCi will focus on off-line customers instead.

"Whatever shakeout occurs will be over this and the next quarter - the dot-coms that are running out of cash are running out of cash now, the writing is on the wall, it's pretty clear who they are," Lansing added.

NBCi added that it expects its burn rate of about $40 million in the first quarter to remain constant for the second and third quarter, with improvements after that. It still has about $409 million on the balance sheet.

ValueVision International Inc. (Nasdaq: VVTV), a shopping network that is 36 percent-owned by GE Equity and NBC, also took a tumble Tuesday.

Shares were down 6 1/16 to 22, or 21 percent, despite a press release from the company which called NBCi's announcement something which may "ultimately afford the company a more powerful branding opportunity."

ValueVision said it plans to proceed with the relaunching of its television home shopping network, which will now come under the NBCi brand, rather than the planned SnapTV and snaptv.com name.