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EarthLink Snags PeoplePC for $10 Million

EarthLink Inc. put up about $10 million cash Monday to acquire San Francisco-based ISP PeoplePC Inc. .

EarthLink is looking to the PeoplePC acquisition to bring it a technical and service platform that will allow it to offer customizable services for corporations, associations and other private label distribution opportunities.

"As part of our growth strategy, EarthLink is committed to providing a full range of Internet services to meet the access needs of different customer segments," said Garry Betty, EarthLink chief executive officer. "We currently offer award-winning premium dial-up, high-speed, wireless and Internet appliance services to approximately 4.9 million subscribers. PeoplePC's product capabilities complement our existing offerings and bring to EarthLink a technical and service platform that provides a compelling service to the value segment of the ISP market."

Under the tender offer and merger agreement, EarthLink will offer 1.71 cents cash for each outstanding common share of PeoplePC for an aggregate purchase price of about $10 million. However, EarthLink said pre-closing adjustments to the purchase price could raise the price per share to as high as about 2.45 cents per share, or about $14.3 million.

The deal also calls for EarthLink to assume about $35 million in deferred service liabilities to PeoplePC subscribers who purchased pre-paid Internet access services together with a PC as part of a bundled package.

EarthLink said it expects to begin the tender offer in about 10 calendar days. The deal requires that a majority of the PeoplePC common stock must be tendered before the offer expires. Any shares not acquired in the tender offer will be acquired in a subsequent merger transaction at the final tender offer price.

The acquisition, expected to close in the third quarter, will give EarthLink an additional 60,000 paying monthly subscribers and about 500,000 pre-paid, bundled subscribers.

In related news, the ISP Monday joined forces with New York-based ScreamingMedia Inc., under which Screaming Media will deliver infrastructure and information services to EarthLink's wireless and appliance-based Internet access.

ScreamingMedia will provide news, stock quotes, weather and lottery information to EarthLink subscribers using MailStation e-mail devices, and AP MegaSports in XML to subscribers using PDAs, Blackberrys and other wireless devices.

"More than ever, Internet appliance and mobile Internet users must see relevance in the service experience we deliver," said Rajan Shah, director of marketing for EarthLink Everywhere. "They want to stay informed and productive. They want variety and customization in their news and information."

Steven Spencer, CTO of ScreamingMedia, added, "Delivering categorized, actionable information to a multitude of platforms is the key strategic business initiative for access providers as they look to reduce customer churn, increase the use of their alternative services and, overall, create a compelling, interactive experience for customers."