May 10, 1999 10:15 PM PDT

PointCast acquired by Idealab

PointCast said it has agreed to be acquired by Internet entrepreneur Bill Gross's Idealab, ending a long effort to find itself a buyer.

The deal, first reported by CNET News.com last week, comes almost a full year after PointCast scrapped plans to go public, and just a month after the collapse of the company's plans to sell itself to a group of Baby Bell telephone companies.

Terms were not disclosed. But sources peg the price at about $10 million in cash and stock--far less than earlier valuations for the privately held company.

"We had numerous offers on board. But this was the best deal for all the shareholders and employees, regarding long-term value creation potential," said PointCast chief executive Phil Koen. "At the end of the day, we felt this was a superior offer."

PointCast, which will retain its name, will be merged with Launchpad Technologies, a San Diego company founded and backed by Idealab, according to Larry Gross, an Idealab general partner. Launchpad's preeminent product, eWallet, an e-commerce application aimed at streamlining online shopping, will be integrated into the Pointcast service, he said.

PointCast plans to launch a new version of its "push" news and content delivery software later this year, Larry Gross said.

"We're very excited about the new products they have under development," he said in an interview. "The [PointCast] client that currently exists ... is about to get a pleasant surprise when we come out with the new version, which will be a 'thin' client."

Sources said the deal is expected to close by the end of the month, pending shareholder approval. PointCast's original investors, such as Benchmark Capital, will receive only a portion of their investment back.

Koen said PointCast employees will be retained, but the future of the executive team remains to be determined.

Like many venture capital firms, Idealab encourages its prot?g? companies to work together. Idealab is exploring how to integrate PointCast with its other companies, Larry Gross said.

In the past year, Idealab has looked hard at finding creative ways to use advertising to subsidize traditionally expensive technology products and services. Some of its most high-profile recent investments have been in Free-PC.com, which distributes ad-supported personal computers, and NetZero, which provides free, ad-supported Internet access.

PointCast's three strikes
The Idealab announcement closes a difficult year for the once high-flying PointCast, which has watched a valuation of hundreds of millions of dollars gradually dissolve into today's more prosaic buyout price.

In 1997, Rupert Murdoch's News Corporation had discussed a $450 million buyout with PointCast executives, sources have said. But that deal never materialized.

The company had a second chance at the financial big time with plans for an IPO last year. But PointCast withdrew plans to go public last summer, citing a desire to talk with strategic partners.

In the interim, the company talked to NBC about taking a $20 million stake in the company, in exchange for roughly one-sixth ownership. That proposed deal--which also failed to happen--would have valued PointCast at about $120 million, according to sources.

PointCast had one more arrow left in its quiver, however. Executives staked the company's future on an ambitious agreement with a consortium of regional telephone companies that included BellSouth, US West, and Bell Canada, along with software giant Microsoft. Together, the group hoped to create a consumer broadband service to compete with @Home, using the telcos' high-speed DSL telephone lines.

But that deal collapsed in March, after Microsoft pulled out and the Bell consortium could not get another major investor, such as SBC Communications or Bell Atlantic to replace Microsoft.

That left PointCast in a financial bind. In early April, the company cut a third of its work force to temper its losses, and started looking for other ways to raise funds. The company started to search for investors willing to put $15 million to $20 million into the company, or find a buyer.

Koen declined to comment on the sale price, other than to note the company had several offers on the table.

 

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