The acquisition bolsters EMC's effort to increase the fraction of revenue that comes from selling software instead of its traditional business of selling hardware. EMC chief executive Michael Ruettgers predicted in October that nearly one-fifth of EMC's 2001 revenue goal of $10 billion would come from software.
Softworks' software is used to ease the management of information kept on centralized storage systems. It works with several different types of computers, including IBM S/390 mainframes, Windows NT and Unix.
"It makes great sense," said Dataquest analyst Carolyn Dicenzo.
For EMC, it means its new Control Center product will be better and the company can accelerate its push to tap into Unix and Windows NT networks, she said. And for Softworks, it means the company's solid products will get a future that had become uncertain with Softworks difficulties expanding out of the mainframe market, she said.
Softworks stock rose 0.25 to 9.56 in midday trading. In recent weeks, the stock has been climbing from an all-time low of 3 the company hit in November. EMC stock dipped 0.75 to 98.25.
Under the terms of the agreement, EMC will buy all outstanding Softworks shares at $10 each. Boards of directors at both companies have approved the agreement, but regulatory approval still must be obtained. The deal is expected to be completed by the end of the first quarter of 2000.
Softworks, a 240-person company, "has hit some logistics walls" as it expanded from the mainframe market, where customers approach companies, to the feistier realm of Windows and Unix, where companies have to market their products more aggressively, Dicenzo said.
"Softworks has been a very solid company with good products and a reputation for good support, but they're a very low-visibility company," Dicenzo said. "EMC is the premier sales and marketing company and is very committed to software."
In addition, Software, faced with competition from consolidating competition, was having trouble paying for the increased need for research and development, she said. "It was starting to have profitability problems," she said.
EMC's core business is selling storage hardware that attaches to powerful servers and mainframe computes. It expanded its line into lower-end but still fairly powerful storage systems with its acquisition of Data General in August.
EMC is facing increasing competition. IBM has begun selling a new storage product called "Shark." Sun Microsystems, which sells servers popular among Internet companies, is trying to bundle as much of its own storage products. And EMC's former ally Hewlett-Packard now sells HP-labeled storage from Hitachi Data Systems. CheckFree Holdings today said it will acquire BlueGill Technologies, a provider of Internet billing software, in a stock transaction worth $250 million.
Atlanta-based CheckFree said the BlueGill buy will extend its services to international markets and incorporate BlueGill's existing software, which provides an electronic billing and payment system to its own set of online bill-payment services. BlueGill said it has a growing customer base in South America and Europe, including Barclay's Bank and Cable & Wireless.
Under the deal, CheckFree and BlueGill said they plan to offer billers, banks, Internet portals and businesses a broad product suite that includes tools for making electronic bills available on billers' Web sites and financial services' sites. The suite will also provide customer service and support for online billing services, and manage the payment process between consumers and billers.
CheckFree said it will exchange approximately 3.2 million shares of its common stock for all outstanding BlueGill Capital stock based on a valuation of $250 million.
CheckFree said BlueGill's management team and 100 employees, along with its locations in Ann Arbor, Mich., and Toronto, Canada, will remain with BlueGill. The new unit's financial results will be reported within CheckFree's software business segment, the companies said in a statement.
For the remainder of CheckFree's fiscal year, which ends June 30, 2000, the company said it expects BlueGill to contribute about $5 million of incremental revenue and to dilute earnings per share by about 10 cents per share before charges.
Last week, CheckFree and Yahoo launched a new service that allows customers to receive bills over the Internet, which marked the latest effort by a major company to encourage widespread adoption of online bill-paying services. Yahoo and CheckFree introduced an extension of Yahoo E-bills that will allow customers to not only pay their bills online but also to easily access and view their bills. Earlier this year, Yahoo and CheckFree unveiled an online bill-payment service.
The BlueGill transaction will be accounted for as a purchase, and is expected to be final in early 2000, the companies said. BlueGill has customers including Citigroup's CitiBank, IBM and Billserve.com.
Intel has nabbed a tactical victory in a patent lawsuit, a ruling that could lead to a termination of the multimillion dollar claim.
U.S. District Court Judge William Orrick has granted Intel's summary judgment in TechSearch vs. Intel, which effectively has lead to a dismissal of the claim for now. Orrick also vacated a pre-trial conference, slated for January 11, and the start of the trial, which had been scheduled for January 24.
TechSearch, a Chicago-based intellectual property consulting group, filed the patent infringement suit against the chip giant in August 1998.
The claim revolved around patents TechSearch acquired from International Meta Systems (IMS). TechSearch alleged that some of the intellectual property underlying the Pentium Pro and Pentium II processors infringed upon patents issued to IMS. TechSearch attorney's estimated the damages at $500 million or higher.
Intel argued that its own patents were "prior art," or older than, the IMS patents. Orrick ruled in Intel's favor and dismissed the claim.
Still, despite the dismissal, the case may not be over. The judge has yet to release his final findings. As a result, it is unclear whether TechSearch will be able to amend its claims and revive the action fairly easily or whether it would have to resort to the more costly and time consuming route of filing an appeal.
An Intel spokesman stated that the scope of the ruling will be known when the judge issues a promised memorandum on the decision.
Analysts hit Micron Electronics today with nearly a 50 percent cut in its earnings estimates, despite a 25 percent jump in first-quarter earnings and efforts to focus on its e-business strategy.
Micron, which has struggled for years to break into the top five PC makers, saw analysts drop their year-end estimates to 30 cents from 55 cents, based on a consensus of nine analysts who changed their estimates this morning.
And for the second quarter, analysts sharply dropped those figures to 4 cents from 13 cents.
The cause of the concern largely centered around declining PC market share. Although Micron recently jumped into the Web hosting business with two acquisitions, the company's core business remains hardware, where price declines have decimated profits for all but a few. Micron also took a hit in two quarters this year because of product delays at Intel, according to analysts and executives.
"They're getting cut by 50 percent, and that's huge," said Tony Crooks, a spokesman for research firm First Call.
He added that 16 analysts cover the company, and it's likely the others will also revise their numbers before the day is over.
Micron's stock, meanwhile, fell as much as 9 percent in morning trading to 11. Micron's stock has languished around the low-teens since May, having fallen from its 52-week high of 22.62 earlier in the year.
Analysts were concerned with Micron's deteriorating core PC business and declining revenues in its consumer, commercial and government markets. The company's small business market, however, showed some growth.
Micron's earnings for the quarter derived from its SpecTek memory chip business.
"The company derived more than 100 percent of its earnings from the volatile SpecTek division, while its core PC business is still operating at a loss. [The] SpecTek performance is not sustainable," Steve Fortuna, a Merrill Lynch analyst, said in a research note this morning.
Merrill Lynch cut its fiscal year 2000 revenue forecast to $1.08 million from $1.27 million. Micron ends its fiscal year in August.
Meanwhile, Micron yesterday reported a 25 percent increase in its first quarter results.
The computer maker's net profits rose to $14.6 million, or 15 cents a share, for the quarter ending Dec. 2, up from $11.7 million, or 12 cents a share, a year earlier. Revenues, meanwhile, fell to $353 million--down 13 percent from a year ago.
Shares of Juno Online blasted nearly 130 percent higher this morning, following bullish reports by Wall Street analysts on the company's plan to offer a free ISP service.
Juno stock was up 129.31 percent, or 37.5 points, at 66.5. The stock reached as high as 72, surpassing its 52-week high of 33.06. Juno shares have hit a low of 8.88 during the same period.
Just yesterday, Juno said it planned to broaden its offerings to include a free advertisement-supported Internet access service and lower-cost monthly services, applying pressure on dominant online services provider America Online.
"We believe that this is a significant positive for the company and the stock, as it is the natural evolution of its cost-effective, free-email model," wrote James Preissler, an analyst at investment banking firm PaineWebber. "This now positions Juno as the leading dial-up provider behind only AOL."
Preissler added that he believes that Juno, with its current market cap of about $1.1 billion, is significantly undervalued on a "relative and fundamental basis." PaineWebber reiterated a "buy" rating on the stock while raising its 12-month price target to $120 from $60 per share.
The ISP market continues to experience upheaval as the prevailing business models keep evolving. There are now three models: the premium offerings from AOL, MSN and Excite@Home that provide support and content for a monthly fee; value-priced services such as AOL's CompuServe, Juno Web and Earthlink/Mindspring; and the no-frills services such as those offered by NetZero and AltaVista.
Another force altering the ISP landscape is the arrival of retailers, which are beginning to set up ISPs in partnership with major Internet players. In the past few months, AOL, Microsoft and Yahoo have all announced alliances with retailers to launch co-branded ISPs.
"I expect you'll see financial players [and] more retailers, including airlines, jumping in and offering Internet access," said Zia Daniell Wigder, an access analyst at research firm Jupiter Communications in New York.
Preissler noted in his report that Juno is well-positioned to turn the free ISP model into a profitable business model because of its online and offline technology, scale and network architecture.
"Juno's offline email architecture allows it to minimize the online time while still getting paid while the user is checking email offline," wrote Preissler.
The challenge, according to Preissler, is for ISPs to find ways to decrease their infrastructure and telco costs to a level below the revenues generated by advertising and e-commerce transactions.
Although the industry average is about 10 users per port, the entry point to a network, Preissler believes Juno could succeed in supporting 20 users per port. Juno currently pays about $5 to its telco partners for connection, but because of improving efficiencies in managing ports, as well as falling rates, Preissler thinks Juno could wind up paying about $2 per port connection.
In a move that is likely to shake up the online sporting goods market, three of the world's most successful and popular athletes--John Elway, Michael Jordan and Wayne Gretzky--have teamed with television network CBS and leading venture firm Benchmark Capital to launch MVP.com, an online sports store.
MVP.com formed an alliance with CBS, in which the network will provide $85 million in advertising, promotion and other considerations over a period of four years, in exchange for an equity stake in the company.
In a related transaction, MVP.com will acquire and operate the retail business of SportsLine.com, an online sporting news and commerce site. MVP.com and SportsLine have entered into an exclusive, 10-year, $120 million marketing arrangement, giving SportsLine.com an equity interest in MVP.com.
The company also received more than $65 million in financial backing from Benchmark Capital and Freeman Spogli. MVP.com will also get some retailing advice from Galyan's Trading, a sporting goods retailer.
The move highlights the continued blurring of lines between new media companies and e-commerce players. CBS has taken many strides over the past year to acquire or invest in health and financial information sites that also sell products and services to consumers. CBS owns about 15.5 percent of SportsLine. Healtheon/WebMD has made similar arrangements to sell health products through its site.
"[Today's deal] has set the paragon example of how to monetize media traffic into e-commerce potential," said Phil Leigh, an analyst at investment firm Raymond James who follows SportsLine. "[SportsLine] is getting paid for generating traffic for MVP and at the same time eliminating its concerns about order fulfillment and service because it has turned all that over to MVP."
Leigh added that Jordan also owns a stake in SportsLine.
With no clear leader in the crowded playing field of online sporting merchants, the arrival of MVP.com is likely to shake up a market that until recently was fair game to even the smallest niche players. MVP.com will be facing off against several players, including Gear.com, in which online retailing giant Amazon.com owns a 49 percent stake; Fogdog.com, which filed to go public in September; and Lucy.com, a sporting goods store aimed at women.
Traditional retailers including Wal-Mart, Kmart and Footlocker as well as brick-and-mortar sporting goods giants such as Sports Authority are also in the running blocks, ready to sell sporting goods on the Net.
MVP.com said it hopes to avoid getting mired in a price-cutting war with its online competitors by concentrating on providing strong service for high-end sporting goods products.
Though it faces strong competition, superstar power is one thing MVP.com does not lack. John Elway has won the last two Super Bowls in NFL Football, Michael Jordan dominated basketball, and Wayne Gretzky set nearly all records in ice hockey. All three athletes retired in the past 2 years. MVP.com is banking on their names and the belief that consumers may value sporting goods that come with a stamp of approval from these athletes.
Former Sears, Roebuck senior executive vice president John Costello, who has been appointed MVP.com's chief executive, said that the global market for sporting goods is about $150 billion annually.
These companies are competing for an estimated $77 billion for both the online and offline domestic markets, according to 1998 figures from the Sports Business Research Network. Forrester Research projects that roughly 8 percent of sporting good sales will be made online by 2004.
"Our alliance with MVP.com significantly enhances SportsLine's ability to capitalize on the enormous e-commerce market for sporting goods," said Michael Levy, chief executive of SportsLine.com.
MVP.com will provide a selection of sports apparel and equipment, with advice from the three former professional athletes who were chosen as Most Valuable Player (MVP) in their respective leagues during their athletic careers.
MVP.com also hopes to capitalize on its land-based partnership with Galyan, which has 20 stores in nine states, to reach shoppers online and offline.
"We believe we have the best of both worlds with MVP.com focused squarely on the Internet space and Galyan on the bricks-and-mortar space," Costello said. "MVP.com will be feature in all Galyan advertisements, and eventually we'll roll out kiosks in their stores."
Costello added that people who have purchased goods from MVP.com will be able to return or exchange merchandise at Galyan stores. He added that the company has several distribution facilities in place.
The new company, set to launch in January, is slated to hit the public market some time next year.
Elway will serve as chairman of MVP.com, leading the board, which will include Jordan, Gretzky and Costello.
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