As reported earlier, the companies hope the agreement will allow them to focus on and further develop Internet strategies that are core to their individual businesses. MSN said it plans to strengthen its services to give consumers and businesses tools for communicating and conducting commerce online.
Sidewalk and CitySearch compete in the market for offering information about local entertainment, news, and shopping. After divesting Sidewalk, Microsoft will retain its "yellow pages" and buying guide properties.
Under terms of the agreements, Microsoft will take an initial 9 percent stake in Ticketmaster Online-CitySearch. That stake could climb as high as 13 percent with a warrant exercise, making Microsoft the largest outside shareholder excluding USA Networks.
Ticketmaster Online-CitySearch plans to develop a special version of its CitySearch local arts and entertainment city guide service to be delivered to consumers through a newly created MSN local channel and through the MSN Entertainment channel.
The deal also allows CitySearch to expand distribution of its city guide services by becoming the exclusive provider of arts and entertainment city guides and the primary provider of online ticketing and personals on MSN. CitySearch will also gain distribution on WebTV.
Ticketmaster Online-CitySearch will continue its marketing and cross-promotional arrangement with Lycos, the companies told reporters during a conference call today.
"Microsoft has not asked us to restrict anything we are doing, and we haven't asked them to restrict anything they are doing," Ticketmaster Online-CitySearch chief executive Charles Conn said today.
"If there hadn't been?a productive divergence between the direction of our two businesses, we would have had a hard time putting the deal together," Conn added.
The acquisition allows Ticketmaster Online-CitySearch to accelerate the release of the CitySearch city guides to a national audience, expanding from 33 cities to 77 cities worldwide. The company hopes the deal will help increase its reach by more than 40 percent.
About 90 full-time employees at Sidewalk will be laid off, the companies said. But executives from both companies jumped to note that there are more than 200 positions available at CitySearch for "people who are flexible."
"We think that this is a terrific deal for both companies and for the consumers and merchants we serve," Conn said. "It will allow us to more quickly reach our city expansion goals, to add a high-quality distribution relationship with MSN, and ultimately to better help our consumers get things done locally."
Excluding the impact of selling tickets and other distribution deals, Ticketmaster Online-CitySearch expects the revenue impact from banner advertisement sales on Sidewalk to generate about $10 million in the first year.
Matt Kursh, business unit manager at MSN, said: "I'd like to say we are going to raise Microsoft's revenue by 10 percent, but in general, the way we look at this deal, its effect on revenue is probably less direct than it is for CitySearch."
Kursh added that MSN is likely to see an overall loss of traffic as people looking at arts and entertainment flow to CitySearch instead.
"It was hard for us to convert people looking at restaurant reviews and movie and concert listings into revenue," Kursh said. "That is something CitySearch is well equipped to do since they earn revenues by selling tickets and merchandise."
Shares of Ticketmaster Online-CitySearch blasted higher in late afternoon trading, jumping 19.12 percent, or 6.5 points, to 40.5. The stock has traded as high as 80.5 and as low as 21.56 during the past 52 weeks.
Shares of Microsoft, which have surged higher recently on speculation that the company is planning to issue a tracking stock for MSN, dipped 0.69 percent to 98.75.