NetZero, Juno plan merger to form ISP giant

By Ashlee Vance, IDG News Service |  Networking

Free ISPs (Internet service providers) NetZero Inc. and Juno Online Services Inc. announced plans Thursday to merge, creating what they said would be the U.S.'s second-largest ISP after America Online Inc.

The combined company would have more than 7 million active users based on figures for March 2001, the companies said in a statement. Of that figure, one million are paying subscribers, while the other 6 million use free Internet services offered by the two firms.

Both NetZero and Juno would become wholly owned subsidiaries of the newly formed company, to be called United Online Inc. The combined company would continue to offer free access under the NetZero brand, while paying services would be offered under the Juno brand. The deal is expected to close by the end of the year subject to regulatory approvals and other customary conditions, the companies said.

AOL is the world's largest ISP, boasting close to 29 million users worldwide and around 18 million in the U.S. The newly formed company would also compete with Microsoft Corp.'s MSN Service, EarthLink Inc., AT&T Worldnet and others.

NetZero, Juno and Bluelight.com LLC -- the online arm of retail giant Kmart Corp. -- are three of the largest remaining free ISPs. They use their free service model to help compete against other ISPs, and obtain revenue by selling banner advertisements and offering a premium service to subscribers willing to pay for it.

While the two companies appear on good terms today they have squared off recently in court. NetZero sued Juno late last year, charging that its navigation window, where it displays banner advertisements, violated a patent awarded to NetZero. Juno, meanwhile, sued both NetZero and Qualcomm Inc. last year, accusing them of infringing on one of Juno's patents that lets users view Web content while off line. It wasn't immediately clear Thursday whether those lawsuits have been resolved.

Mark Goldston, chairman and chief executive officer of NetZero, will become chairman, president and CEO of United Online, while Charles Hilliard, NetZero's current chief financial officer, will become CFO of the combined company.

All outstanding shares of NetZero and Juno would be exchanged for shares in the new company, which would be traded on the Nasdaq stock market. NetZero shareholders would receive 0.200 shares of United Online for each share of NetZero stock, while Juno shareholders would exchange each one of their shares for 0.357 shares of the new venture.

The companies' combined revenue was $41.5 million for the quarter ending March 31, they said in the statement.

Executives from the two companies will host a conference call on Friday at 8 a.m. PDT to discuss details of the merger. The call will be accessible via a Webcast from each companies' site.

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