GO.com Goes As Disney Brings Internet Efforts In-House
The Walt Disney Co. said today
it is giving up on running its Internet affairs as a separate business
and will bring its Walt Disney Internet Group back into the
fold. Holders of the Internet business's tracking stock - worth now about
20 percent what it was a year ago - will receive Disney common
stock instead.
Disney said the move also spells the end of its GO.com portal site,
the closing of which will result in the loss of some 400 jobs.
"The Internet continues to be a central focus of our company's
business strategy," Michael Eisner, Disney's chairman and chief
executive officer, said in a statement. "We believe this action
should help us gain greater competitive advantage as we leverage
Disney's creative content, brands and other assets.
"The competitive factors that initially compelled us to establish a
separately traded class of common stock tied to our Internet
operations have fundamentally changed," Eisner said.
Disney said the Internet group - operating intact save for the
Sunnyvale, Calif.-based GO.com operation - will continue to produce
such popular sites as ABC.com, ESPN.com, NFL.com, Movies.com and
Family.com, as well as such Disney-themed sites DisneyStore.com,
DisneyAuctions.com and DisneyVacations.com.
To reel in the Internet group, Disney said, it will convert all
outstanding shares of the trading stock into Disney common stock on
March 20. Based on average prices of the company's two stocks from
Dec. 7 through Jan. 5 - a period during which the Internet
group's shares often traded below $5 each - Disney said it will
exchange 0.19353 of a DIS share for each DIG share. In all, the
company expects to issue about 8.1 million new Disney shares, it
said.
As a result of the move, Disney said, it will record a $790 million
write-off of intangible assets and a tab of between $25 million and
$50 million for severance pay and a fixed-asset write-off.
Disney acquired the heart of its Internet group when it purchased
Starwave, a company Microsoft alumnus Paul Allen helped launch and
which was already hosting Web sites for the NFL, the NBA, ESPN and
ABC News. The purchase of Infoseek Corp. added the portal and Web-
search layer than became GO.com.
Disney said a "streamlined" version of GO.com will continue to
operate while users are weaned off the portal. Until then, it said,
its remaining crew will support the Infoseek search engine.
The company said it is also "evaluating various alternatives for
the GO.com assets, including the sale of the Infoseek search
engine."
Steve Bornstein, chairman of the Walt Disney Internet Group, said:
"This is a difficult decision, as it impacts both our employees and
GO.com users. However, the Internet environment has continued to
shift and change, and therefore our strategies must also change."
The Disney's remaining Web efforts, Bornstein said: "We will
continue to invest in those properties and intend to achieve long-
term growth and success by managing them in a way that more closely
aligns them with Disney's established (divisions). This is
consistent with Disney's long-held synergistic approach to all of
its businesses."
On the New York Stock exchange today, Disney's DIS stock closed at
$30.82, up $1.01, while the Internet group's tracking stock closed
at $5.86, down 8 cents. The Internet group's stock recorded a 52-
week high of just over $30 last January.
GO.com is at: http://www.go.com/.
Disney is at: http://www.disney.com/.