Hartford Courant from Hartford, Connecticut • 43

Tuesday, April 10, 2001 THE HARTFORD COURANT E7 NBC To Absorb Its Money-Losing Internet Subsidiary By SETH SUTEL Associated Press NEW YORK NBC is shutting down its loss-ridden Internet subsidiary, acknowledging that any hopes of its becoming profitable had vaporized along with the online advertising market Many of the300 jobs there will be eliminated as the unit's assets are integrated into NBC. The announcement Monday marks the latest move by a major media company to drastically scale back its Internet ambitions. The Walt Disney Co. and News Corp. have also absorbed their online units, and other media players have pulled plans to sell shares in their online operations to the public.

Senior executives at NBC and NBC Internet told The Associated Press that they had been weighing alternatives for the subsidiary since the beginning of the year, including a sale, a merger with another company or liq-' uidation. "The sharp declines in the Internet advertising market convinced us that it didn't make sense to pursue a portal strategy," said NBC's chief financial officer, Mark Begor. "We wanted to find a way to maximize shareholder value and wind down the business in the best way possible." Like many companies that rely on online advertising, NBC Internet has been losing a staggering amount of money. In the three-month period that ended in December, it posted a net loss of $245 million on revenue of NBC Internet's assets will be absorbed back into NBC, but it's not yet clear how they will be used. The NBC.com website will fall under the jurisdiction of Scott Sassa, the chief of NBC's West Coast operations.

Still to be determined are the late of a dozen or so companies, such as Fly s-wat, GlobalBrain or AUBusiness, that NBC Internet acquired for stock during the course of a $500 million buying binge. "There's no question that we'll dramatically reduce the scope of the operations and sell some assets," said NBC Internet's chief executive, Will Lansing. "But first we'll see how it fits into the NBC strategy." The purchase will cost NBC about $85 million in cash, and if places a value of about $150 million on the Inter net subsidiary. That's a far cry from the roughly $5.7 billion value that investors assigned to NBC Internet in January 2000, when its shares closed at a high of just above $100. NBC has been trying to turn around its Internet subsidiary for some time.

Last year it installed Lansing, a former GE executive, to implement fiscal discipline and revamp the company's blurred marketing strategy, which employed a number of different brands and websites, such as Snap and Xoom. NBC Internet has been trimming its payrolls during the past nine months from a high of 850 last August to 300 now. Begor said NBC would "significantly reduce" the head count as NBC Internet is integrated back into the network, but he declined to How Neato It Is To Be A Market Leader Hopes IPO Raises Billions $31 million. Excluding asset writedowns or restructuring charges, it would have lost $47 million for the quarter. NBC, a subsidiary of Fairfield, General Electric will pay $2.19 in cash for each publicly held share of NBC Internet, a premium of 46 percent from the closing share price of $1.50 on Friday.

NBC currently owns 39 percent of the company, which was formed in the fall of 1999 in a multipart deal with CNET and other Internet companies. Shares of NBC Internet jumped 64 cents, or nearly 43 percent, to close at $2.14 Monday on the Nasdaq Stock Market. Shares of NBC's parent company GE rose 83 cents, or 2 percent, to close at $42 Monday on the New York Stock Exchange. But Neato isn't staking its future on CD labeling alone. In addition to building its markets and refining its label applicator, Neato has been branching out into related products.

The company now sells CD "jew-elbox" inserts, videotape boxes, and labels for cassettes, floppy disks, Iomega Zip and Jaz discs, CD mini-discs, and business-card CDs. The products co-branded as Fellowes Neato Labeling Products are now sold in such stores as CompUSA, Best Buy, Circuit City, Target, Wal-Mart, Kmart and others. Neato also has been focusing on its direct sales, which it conducts via its Web site at www.neato.com. Every time Tracy thinks about slowing down, another opportunity presents itself. "One day I want to go fishing," he said.

"And the next day, there are new products on the drawing board." $37.90, but the company uses a more conservative assumption of $30 a share for various models in the statement. The demutualization, announced in 1998, could be completed by the end of the year. The company needs to go public so it can continue to grow "as a leading global financial services company," Executive Vice President Mark Griersaid. The SEC filing, with a registration fee of $972,325, completes Prudential's demutualization application with the New Jersey Department of Banking and Insurance. Department Commissioner Karen L.

Suter, who got the rest of Prudential's demutualization plan on March 14, now has 30 days to certify that the application is complete and that the proposed notification to policyholders can be made. Prudential By JEFFREY GOLD Associated Press NEWARK. N.J. Prudential Insurance Co. of America, the nation's largest life insurer, on Monday filed plans showing it intends to raise up to nearly $3.9 billion by becoming a publicly traded company.

The Newark-based financial giant would do that by selling 89 million shares to the public, according to the registration statement for what will be called Prudential Financial Inc. In addition, 454.6 million shares would be distributed among 11 million policyholders when Prudential converts from a mutual company owned by the policyholders, said the filing with the Securities and Exchange Commission. The statement estimates the company's equity at $20.6 billion. That could make each share worth about i 7S 'Up until then, I hadn't paid much attention to Neato," he said. "I had intended to retire and play music.

But I couldn't stop answering the phone, and the phone would not stop ringing for this product." As homemade CD-making took off, so did Neato. Its patented label applicator and free software were a draw for customers; the real profit was in the labels themselves. They cost pennies to make, but the labels sell for about a dollar each. Incredibly, that's now several times the cost of the blank CD itself. "We're very profitable," Tracy acknowledges.

A Neato kit, containing the Neato label applicator and an assortment of labels and jewel box inserts, sells for about $30. A wide variety of labeling packages are available separately. As sales grew, Neato's success began attracting competitors, which ultimately included such heavyweights as Memorex, makers of blank recording media, and Avery Dennison, maker of adhesive labeling products. That led Neato to join forces with Fellowes Manufacturing of Itasca, perhaps best known for making the brown "banker's boxes" for document storage. Tracy said the Fellowes partnership has been a tremendous help with the manufacturing, marketing and distribution of the Neato product.

Whether the company's profit margins can hold in the face of growing competition remains to be seen. Given the price declines on recordable CDs, similar trends may follow in the labeling industry, said Richard Kelly, president of Cambridge Associates. "It's a healthy growing part of the media business, but I can't imagine they'll keep that kind of a selling price going forward," Kelly said. THANK YOU to these area companies for their participation in the United Way Community Campaign Corporate Challenge Match sponsored by Continued from Page El write on one side of the CD with a marker. Use of adhesive labels was actively discouraged.

"There were always concerns that putting some kind of a label on the disc like that might adversely affect the performance of the disc," said Tom O'Reilly, editor of TapeDisc Business magazine, a trade publication. But Tracy was not convinced. His own private tests, he said, showed a CD was "just as good or better with a label on it." Soon, Tracy was having die-cut bels made and applying them to CD-ROMs, using the Mr. Coffee filter basket and a few other items to ensure that the labels were centered on the disc. MicroPatent would eventually apply 20,000 labels that way.

As prices on CD-ROM gear came down, Tracy decided he'd try to sell a version of his labeling kit to others. (The name, he said, came from people who would exclaim "neat-o" when they saw the labeling kit in action.) Tracy's combination of creative problem-solving and business opportunity neatly echoes his own career as entrepreneur and artist. A music afficionado who keeps a dozen guitars in his office, Tracy once wrote and starred in his own musical production, titled "Halloween Elvis." The production includinga tune called "Do What'cha Wanna Do" that might serve as Tracy's personal anthem didn't make a dime. But its costs were easily covered by Tracy, who sees his business success as the means to pursue his artistic interests. It wasn't until Tracy sold MicroPatent to Warburg Pincus in 1997 that he finally decided to actively build up the CD labeling business.

The Ultimate Driving Machine 2001 iFTltmmT BMW 3301 Lease For Per mo czkuvo iphhiih fsnnc Open Mon. Than. 8:30 A.M. 8:00 P.M., Trl 8:30 A A Order be more specific. Despite backing from the NBC network, including $220 million in advertising credits, NBC Internet had always struggled, and didn't get to share the success of NBC's strong cable brands MSNBC and CNBC.

MSNBC.com remains one of the top news sites on the Internet, but that site, like the cable channel it is associated with, is a 50-50 joint venture between NBC and Microsoft, and was never part of NBC Internet. Likewise, the website for CNBC, which has been a runaway hit on cable with its financial coverage, had only a minor participation in NBC Internet Lansing will leave the company alter seeing it through a transition period. The deal is expected to close in the summer. Then she would conduct a public hearing, tentatively set for July 17-19 in Trenton. Prudential policyholders could then vote, by mail, phone or Internet, until July 31.

Suter then has six weeks to decide whether the deal is good for policyholders and the company. The registration said Prudential's 31 board members and top executives are expected to own less than 1 percent of the shares at the time of the offering. About 860,000 shares will be issuable under employee stock options expected to be granted at the time of the offering, the plan said. The company has nearly 57,000 employees. Prudential in March said it would have a stock-based compensation program in which its workers may get a one-time grant of stock options on the date that the IPO closes.

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