A group of telephone companies and Microsoft Corp., which
had been rumored to be moving to purchase Internet "push" technology pioneer
PointCast Inc., have apparently pulled the plug and forced the company to lay off
one-third of its 220-person work force and to rethink its strategy.
Three telephone companies -- Bell Canada, BellSouth Corp.
and U S West -- and Microsoft intended to purchase Sunnyvale, Calif.-based PointCast and
to use the company's technology as a content provider for the telcos'
asymmetrical-digital-subscriber-line high-speed Internet offerings.
But although PointCast had a letter of intent signed with a
buyer or buyers -- it would not reveal the companies involved -- those potential buyers
decided to cancel the deal.
Wendy McCarthy, a spokeswoman for PointCast, added that the
LOI was structured as to prevent PointCast from soliciting any other deals or investments.
"PointCast operated under terms of a letter of intent
with several companies, including telcos, that precluded it from talking with other
partners," McCarthy said. "We were developing new services and formulating a
launch plan for a DSL-based consumer offering. Within the last two weeks, the telcos made
it clear that they didn't intend to move forward."
PointCast had been spending a lot of money developing the
new DSL technology, although it wouldn't reveal how much.
McCarthy said PointCast is talking with a number of
companies -- including its founder and former CEO, Chris Hassett -- about either an
outright acquisition or a strategic partnership.
She would not give a time frame for a deal to be closed,
but she said a partnership would have to bring in between $15 million and $20 million.
"We are looking to leverage our assets in order to capitalize on those assets,"
PointCast has about 1.2 million monthly active users, who
partake of 700 content services and receive more than 1 terabyte (1 trillion bytes) of
data each day.
PointCast had reportedly turned down an offer from News
Corp. last year to buy the company outright for an estimated $400 million.
And an initial public offering that the company planned
last year to raise $52 million was withdrawn after PointCast said it was negotiating with
potential strategic partners.
Based on the number of shares that the company would have
had outstanding (21.3 million) and the price per share ($12), the IPO would have valued
PointCast at about $255.6 million.
PointCast would not comment on the News Corp. deal, saying
that it was mere speculation.
But the company is quite different from some of the
Internet portals that have been scooped up by high-speed Internet-service providers in
While PointCast may have wanted to be the telcos'
answer to Excite Inc. and Go2Net Inc. -- which were purchased by At Home Corp. (parent of
@Home Network) and Paul Allen's Vulcan Ventures Inc., respectively -- its application
was vastly different from those of its portal counterparts.
The biggest difference is that PointCast is a
"push" technology, meaning that it delivers a host of information -- news, stock
data and the like -- to customers who tailor the information to their own needs. A free
service, PointCast gets its revenue from advertising that is continuously updated on the
Portals have been scooped up for their search-engine
capabilities and electronic-commerce functions, while PointCast doesn't provide that
kind of service.
Although PointCast said it is continuing to talk with
telcos, one analyst wondered if the company has anything left to offer them.
"DSL is coming on pretty quickly, and they are feeling
the push from the @Homes and Road Runners of the world," said Abhishek Gami, an
Internet analyst with Chicago-based William Blair & Co. "Instead of going for a
narrow solution, [telcos] are farming it out to multiple vendors."
Although it is possible that PointCast could try to attract
a cable partner, Gami believes that it is unlikely.
"Cable providers want to be the content providers
themselves," Gami said. "[Push technology] definitely becomes more feasible in a
broadband world, but do [cable companies] need it?"