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Spyglass rockets, OpenTV slides on merger news

Shares of Spyglass (Nasdaq: SPYG) soared in early trading Monday after OpenTV Corp. (Nasdaq: OPTV) said it would pay $122.28 a share for the Web pioneer, nearly double its Friday closing price.

In opening trade, Spyglass shares were up 16 1/4 to 86 1/8, or 23 percent. OpenTV fell 30 3/16 to 138 13/16, a drop of 18 percent.

The Mountain View, Calif. OpenTV, which makes software for digital interactive television, said Sunday it will buy Spyglass for $2.5 billion stock. Under the terms of the tax-free deal, Spyglass stockholders will receive 0.7236 OpenTV Series A ordinary shares in exchange for each Spyglass common share. Spyglass shareholders will own 18 percent of OpenTV.

Spyglass, based in Naperville, Ill., was one of the companies behind the Web browser. The company went public in 1995 along with Netscape Communications Corp., which was eventually acquired by America Online (Nasdaq: AOL). Spyglass shares have had a rocky history. Spyglass last issued a stock split in late 1995, and, like Netscape, was walloped by Microsoft Corp. (Nasdaq: MSFT), which licensed Spyglass software to create its Internet Explorer browser.

After Spyglass shares hit a January 1998 low point, the company reinvented itself to focus its software on Internet devices and interactive television. Spyglass has been profitable.

For OpenTV, which went public last year, the Spyglass purchase will expand its digital interactive services -- or two-way TV -- to allow customers to browse the Web and chat. OpenTV said it will also use Spyglass technology to extend services to wireless cell phones and mobile devices. Spyglass' Prism product, which reorganizes and reformats standard Web content to display on set-top boxes, mobile phones and other non-personal computer devices.

"In our view there are a very limited number of companies that have all this technology and this deal will clearly enhance value for our shareholders,'' OpenTV chief financial officer Randy Livingston told Reuters.

Livingston said the deal should be accretive to OpenTV over the next two years on a revenue per share basis and neutral on an EBITDA (earnings before interest, taxes, depreciation, and amortization) per share basis this year and slightly accretive next year.

In the U.S. market alone, $18 billion a year from TV-based commerce and interactive advertising is expected to be generated by 2004, Livingston projected.

The purchase by OpenTV, whose competitors include Microsoft and Wink Communications (Nasdaq: WINK), will double the company's revenue. OpenTV and Spyglass each had revenues of $26 million and $29.6 million, respectively last year, said Livingston.

OpenTV's Chief Executive Jan Steenkamp will remain CEO and while Spyglass chairman and CEO, Doug Colbeth, will become executive vice president, corporate development of a newly formed wireless communications unit, OpenTV said.

Reuters contributed to this report.