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Tuesday, July 13, 1999

Walt Disney to consolidate on-line operations
Company to take over Infoseek in order to increase its presence on World Wide Web
By Seth Sutel
Associated Press

   NEW YORK - The Walt Disney Co. is taking over Infoseek, an early arrival on the Internet scene, in an effort to consolidate its online operations into one enterprise that can leverage the power of Disney's entertainment brands in cyberspace.
   Disney is merging all of its Internet operations together with Infoseek to form a new company called go.com. That's also the name of a portal site the two companies launched together late last year, which has been facing stiff competition from leading portals like Yahoo! and AOL.com.
   Disney has had success with its various Internet holdings, which include Web sites for its ESPN cable channel, the ABC television network and sites related to its theme parks. But the company had not yet brought all these assets together under one roof.
   "We are positioning ourselves to lead in this space," Disney chairman Michael Eisner said Monday at a New York news conference announcing the deal. "We're taking the Disney brand and letting it evolve into the next century."
   Analysts viewed the deal as positive for Disney, but cautioned that a lot of hard work lay ahead for the company in terms of making the most out of its media holdings and shaping a clearer Internet strategy.
   "They have a way to go before becoming a mainstream portal site," said Charlene Li, senior analyst Forrester Research in Cambridge, Mass. "Disney has a great name, but they haven't been able to capitalize on it."
   Disney bought 42 percent of Infoseek last year, and announced a month ago that it was interested in getting control of the rest. Under terms of the deal, Infoseek shareholders will receive 1.15 shares of the new company, which will be a special class of Disney stock.
   Go.com will also include Disney's catalog operation, which could provide key support for any online retail operations down the road. Some Internet companies have struggled with the mechanics of online sales.
   One key point of concern among industry analysts and investors was the lack of a new management team for the new company. Harry Motro is leaving as president of Infoseek after the merger is completed, and it's not clear who will replace him.
   "They clearly need to have a management in place quicky," said James Preissler, an Internet analyst at Paine Webber. "It's a very complex business and they're starting out from a behind position. They're going to have to run very hard, very quickly in order to catch up to big players like Yahoo."
   The new company will have revenues of approximately $350 million. Eisner said Disney has not set a goal for when the company would turn a profit, but he tried to allay any concerns that go.com might follow the well-trod path of many Internet companies that seem to place a higher priority on building market share than making money.