NetZero And Juno Stand United Online

The formerly free Internet services have completed their merger to form United Online. An interesting value proposition for the U.S. Internet access market, it surpasses MSN for active users.

by Patricia Fusco Managing Editor ISP-Planet [September 26, 2001]

NetZero, Inc. (NZRO) and Juno Online Services, Inc. (JWEB), two of the nation's leading Internet service providers, announced the completion of their merger to form a new public company, United Online, Inc.

United Online, Inc. (UOL) now owns both consumer brands of Internet access providers, much like SBC Communications Inc. owns and operates Prodigy Communications along with assorted Bell brands.

Both companies finalized the merger this week following the approval of their respective stockholders. UOL intends to begin trading today on the NASDAQ National Market under the ticker symbol "UNTD." The stock dipped slightly at the market open, trading at around $1.93 per share.

Course of action
Mark R. Goldston, UOL chairman, chief executive officer, and president (and formerly Chairman of the Board, Chief Executive Officer, and Director of NetZero), said the merger establishes the ISP as a new and more formidable player among the leaders in the ISP market.

"In just a few years, NetZero and Juno have amassed millions of users, and we see significant opportunities ahead for United Online as consumers become increasingly aware that they can get high-quality Internet service for less than half the price of many of our major competitors," Goldston said.

"This management team is focused on the opportunities afforded by merging these two outstanding companies," Goldston continued. "We recently announced that, beginning in October, NetZero's free service will be limited to 10 hours per household per month and will not be available in all areas, which we believe will decrease our free service costs."

Goldston added that the results of UOL's formation would help to further reduce user costs of both its free and billable services. But UOL's immediate focus would be growing its billable subscriber based. In that way, the company rests in a unique position of increasing billable service revenues while decreasing expenses.

Charles S. Hilliard, United Online chief financial officer echoed Goldston's sentiments.

"By combining two companies with similar product lines and coverage areas, there are several opportunities to reduce costs and create a single enterprise that is financially stronger and more efficient," Hilliard said. "We have already identified the major strengths and overlap between the two companies that we believe will generate efficiencies going forward."

Items on UOL's cost-cutting agenda include eliminating telecom infrastructure redundancies and consolidating billing systems, as well as fusing facilities and amalgamating the workforce.

Mister congeniality
Goldston concluded his remarks by thanking Juno's founders for their hard work and welcoming those employees that will remain a part of United Online's operations.

"Juno has built an outstanding platform of users, technologies and assets that will benefit United Online going forward," Goldston said. "These achievements are reflective of a group of outstanding employees, spearheaded by CEO Charles Ardai and CFO Harshan Bhangdia … and certain other members of the Juno team will not continue with the new enterprise. We at United Online thank them for all of their efforts and wish them the best in their future endeavors. With respect to the many employees who will remain with Juno, I would like to welcome them to the United Online family."

Based on unaudited, pro forma results for the quarter ended June 30, 2001, UOL's revenues totaled $41.3 million. Revenues from billable services accounted for 70 percent of total revenues, or $29 million. Various forms of advertising and e-commerce programs generated the remaining $12.3 million in revenue. UOL's pro forma cash balances for the same period totaled $177 million, or $4.42 per share based on approximately 40 million shares of common stock outstanding at the completion of the merger. Management expects to incur between $20 million and $25 million in restructuring costs of as a result of the deal.

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