Phoenix jumps on Web plans, Softbank investment

Phoenix Technologies Ltd. (Nasdaq: PTEC) jumped 2 5/16 to 14 Monday after the company formed a new Internet unit and inked distribution pacts with numerous leading Web sites. Softbank Holdings Inc., which owns 70 percent of Ziff Davis, also bought a 20 percent stake in the Phoenix subsidiary.

Phoenix makes system software that is used to boot up more than 70 percent of PCs worldwide.

Ebetween, the new subsidiary of Phoenix, will be the platform for the company's new strategy. EBetween products will allow Internet service providers to pitch services directly to online users by placing icons on the desktop.

America Online (NYSE: AOL), CNet (Nasdaq: CNET), EarthLink (Nasdaq: ELNK), Excite@Home (Nasdaq: ATHM), Lycos (Nasdaq: LCOS), Snap.com, Trend Micro and Yahoo! (Nasdaq: YHOO) have inked distribution pacts with ebetween. Delivery of the service is expected in the fourth calendar quarter of 1999.

Phoenix anticipates generating $10-$15 million of revenue from these initial agreements in the first year. It has applied for 20 patents on its Internet platform-enabling software, which includes the new product category Virtual Bundling Technology (VBT), expected to allow Internet companies to increase consumer reach, and build loyalty.

Ebetween's market strategy will first focus on manufacturers of "white box" (non-branded) PCs, which make up about 35 percent of the PC industry, and Phoenix's ROM-based software products are built into more than 80 percent of white box PCs.

Thirteen leading motherboard manufacturers have also signed an agreement with Phoenix to distribute Phoenix's Internet ROM extensions, which will enable the ebetween Internet services. ABIT, AOpen, Asustek, A-Trend, Biostar, Chaintech, Gigabyte, LuckyStar, MicroStar International (MSI), Shuttle, SOYO, Tekram and Tyan currently generate about 30 percent of the annual, worldwide desktop PC motherboard shipments.

Phoenix also announced it has signed on intent to acquire the operations of Softbank Marketing Solutions (SMS) from SOFTBANK Holdings, in exchange for the equity stake in ebetween. SMS is an authorized registration center for software vendors and device manufacturers, such as Acer, CTX Fountain Technologies, and Fujitsu, as well as Microsoft Windows 98(TM).

Costs in the third quarter ending June 30, 1999 include $3.7 million for market research, product development, patent filings, branding and other start-up activities, $2 million for the acquisition of Softbank Marketing Solutions. Phoenix also anticipates a charge of up to $3.5 million for the discontinuation of some software products and management changes. A gain of $4 million should come from the sale of the Company's remaining equity in Xionics Document Technologies, Inc. (Nasdaq:XION).

Including these costs and gains, Phoenix expects third quarter net income between breakeven and $1 million, or 4 cents a share. Excluding those items, Phoenix's net income for the quarter would be about $4 million to $5 million, or 14 cents a share to 18 cents a share, in line with Wall Street's estimates of 15 cents a share.

The San Jose-based company also said Monday that Albert E. Sisto is to become the new president and chief executive officer.