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NBC Pulls Plug on Online Media Venture, NBCi

In a sign that well-known companies are having as much trouble online as entrepreneurial start-ups, General Electric's NBC has shut-down its online play, NBCi.

Media giant NBC, which said it already held about 38.6 percent of NBCi's shares, said it would pay $2.19 per share, or about $138 million for NBCi, based on shares outstanding as of Dec. 31, 2000.

As a result of the shut-down, NBCi said it would immediately begin cutting the size of its work force as it prepares to scale down the business. The company said it was in the process of determining how to use NBCi's assets.

In 1999, NBCi launched with 500 staff members -- a full cast of characters that gradually peaked at 800 as the dot-com space burgeoned.

Two years later, after substantial downsizing, 300 remaining staff members stand to lose their jobs. While executives declined to say how many positions would be eliminated, this afternoon in a conference call, they admitted staffing would "go down dramatically."

The online closure comes at a time when many traditional media companies are struggling to maintain dot-com divisions, due to a poor online advertising market and signs of a downturn in the U.S. economy. Other companies in the space, namely The Walt Disney Co. and News Corp. have also absorbed their online divisions.

Today, Will Lansing, CEO of NBCi, lamented that "two-years ago the economic outlook for portals was bright. At the time, advertisers would pay millions of dollars to reach eyeballs through content ... but over the last three months Internet media sales have virtually collapsed."

NBC said it was in the process of determining how NBCi's assets would be utilized, including its dot-com acquisitions like Flyswat, GlobalBrain and AllBusiness.

"This transaction lays the groundwork for future decisions about our online presence," said Mark Begor, chief financial officer, NBC, and president, NBC business development and interactive media.

During the transition, which is expected to close this summer, NBC said NBCi would be treated as a "promotional tool rather than as a revenue generator."

The company wasn't totally pessimistic about the future of advertising on the Internet, or staying buoyant with ad dollars in the future.

In particular, NBC said it hopes that as streaming media catches hold with advertisers it can take advantage of revenue generating opportunities with broadband, a technology it considers rooted to its "turf."

And in the face of having spent about $90 million a year in click-through banner ads -- which the advertising space admits is not as effective as other modes of offline advertising in advancing their advertising campaigns -- NBC is eyeing broadband with renewed hopes and wetted lips.

But whether or not the media giant finds advertisers that are willing to sell to its future Internet endeavors remains to be seen.

"It's a tough game for us and others," said Begor.

NBCi, which went live in 1999 when NBC merged several of its Internet assets with XOOM.com and Snap.com, lowered its 2001 earnings forecasts in February.

The company's shares were trading at $2.15 this morning, well below its 52-week range high of $38.56, while shares in General Electric were trading at $41.65, off a year high of $60.50.