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Earthlink Buys e-Mail Device Maker Cidco

ISP contender EarthLink , in the hunt for new customers amid moribund personal computer sales, has agreed to purchase portable e-mail device maker Cidco Inc. .

The $5 million deal is expected to net EarthLink roughly 120,000 Cidco customers to its subscriber base of just under 5 million. The Atlanta-based Earthlink is ranked among the top ISPs such as AOL, United Online and Microsoft's MSN.

In the process of buying the struggling maker of e-mail devices and services, including Cidco's just-released wireless e-mail Mivo products, Earthlink is looking to lasso new segments into its user base by offering consumers a less pricey and somewhat simpler way to check e-mail than the desktop PC route.

The Morgan Hill, Calif.-based Cidco said it granted Earthlink an option to buy 19.9 percent of its outstanding stock at 36 cents per share; EarthLink agreed to put up interim financing of up to $5 million to Cidco, secured against Cidco's assets.

The deal would eventually close once 51 percent of Cidco's common stock has been tendered by the end of February of next year, the companies said.

Shares of Cidco closed unchanged at 31 cents on the Nasdaq Wednesday before its third quarter results were released that showed a loss of $7.5 million, or 53 cents per share, on sales of $5.6 million. In the same, year-ago period, Cidco lost $10.6 million, or 76 cents per share on revenues of $1.5 million.

Despite Cidco's financial troubles, Earthlink sees a distribution pipeline in Cidco through which to extend its products and services, especially those consumers who don't want to buy a PC but may be interested in scaled back e-mail services and other info nuggets.

Sign on new customers with Cidco's scaled back Internet appliances, goes the thinking, and eventually they will trade up to more advanced bundled services and Internet products.

One of Cidco's latest devices is the cordless Mivo 250, which resembles a PC, but is smaller with a small screen attached to a keyboard. The device comes with a 900 MHz basestation and antenna that sends a signal to the base from up to 100 feet away. The user plugs the basestation into a phone jack in order to check and send e-mail from anywhere in the home.

Some of Cidco's devices, including its Mivo series, retail for about $99.95 and include a $9.95 monthly service fee. Retailers that carry the Cidco products are Best Buy, CompUSA, Kmart, Office Depot, Office Max, Radio Shack, Staples and Target.

The Cidco acquisition follows EarthLink's acquisition one week ago of the customer base and domain name gate.net from Cybergate, Inc., an Internet subsidiary of e.spire Communications, Inc. (NASDAQ:ESPI).

EarthLink also announced an arrangement with New York-based travel site IgoUgo.com that would link its travel information into EarthLink's personal start page.