NBC Internet Firm Launched, Stock Drops
Added: (Tue Nov 30 1999)
Pressbox (Press Release) -
By Steve James
NEW YORK - The NBC television network on Tuesday launched its first publicly traded Internet company, NBC Internet Inc. (NasdaqNM:NBCI - news), but Wall Street showed little enthusiasm and the share price slid from the opening bell.
In its first day of trading on the Nasdaq exchange, the NBCI stock closed at $76, down $12.50 from its initial offering price of $88.50.
One analyst who specializes in initial public offerings, or IPOs, said the decline may have been because the new company had not been publicized much beforehand and investors didn't really know what it was.
"Maybe it was seen as having no short-term future, and in this business you either hit the ground running or a steam roller is rolling over you," said David Menlow, of IPOfinancial.com in Millburn, N.J.
NBC Internet was formed by combining the Snap.com Internet portal, the community services and direct electronic-commerce company XOOM.com Inc. (NasdaqNM:XMCM - news), and select Internet properties of NBC, which is known as the Peacock Network.
At a news conference at NBC headquarters in the Rockefeller Center, NBCI unveiled the flagship Web service, Snap (http://www.snap.com), which provides Internet search and directory, community, shopping, e-commerce, multimedia and entertainment services across all bandwidths. It said the service is a place for consumers to find and buy virtually anything on the Internet.
NBC, a unit of General Electric Co. (NYSE:GE - news), is the largest equity holder in NBC Internet, with a 47.3 percent stake. Former stockholders of XOOM.com Inc. own 38.8 percent, and CNET Inc. (NasdaqNM:CNET - news), a former co-parent of Snap.com, holds 13.8 percent.
"For the first time, investors will be able to purchase a piece of the Peacock," NBC President and Chief Executive Officer Bob Wright told reporters in the Saturday Night Live studio. "For 75 years, this has been a network of firsts -- the first U.S. network, the first coast-to-coast broadcasts, the first color broadcasts, the first stereo. Now we are the first to launch a stand-alone publicly traded Internet company."
Noting that estimates showed total electronic commerce business in the United States would exceed $1 trillion in two years, Wright, who will also become chairman of NBCI, said the introduction of the Internet company was a way to take advantage by turning users into buyers.
Chris Kitze, co-founder of XOOM.com in 1996 and CEO of NBCI, told reporters the new entity combined the selling dynamism of XOOM with the ability of Snap.com to bring TV viewers to the Internet portal.
"We are leveraging the power of the Peacock to bring viewers into the Internet and become buyers," he said.
Demonstrating how he could buy a pair of diamond earrings on the new site, Kitze said NBCI was not, however, in the business of stocking warehouses and shipping.
"We are not filling the orders; (rather) we send it directly to our merchant partners."
Edmond Sanctis, NBCI President and Chief Operating Officer, showed that the new Internet site would also satisfy consumers' need for broadband entertainment.
"Internet users are looking for content that walks and talks," he said, clicking on the screen to bring up a broadcast of a vintage Saturday Night Live sketch featuring Gilda Radnor and Bill Murray.
"We are further leveraging our parentage as a leading entertainment network," Sanctis said.
NBC Internet has agreed to buy $405 million in NBC network and cable advertising over the next four years and the Internet company will promote its services on Clear Channel Communications Inc.'s (NYSE:CCU - news) more than 425 radio stations.
The promotions will be integrated on the stations' Internet sites. Kitze said NBCI had agreed to pay $20 million over three years to Clear Channel.