Online promotions firm Promotions.com Monday sold its Japanese business to a Tokyo-based Internet and high-tech incubator, aiming to turn what had been a regional money pit into a cash cow.
Through a deal with Japanese incubator ITX Corporation, New York-based Promotions.com will cede control of its Chakkalina.com promotions portal — similar to the firm’s Webstakes.com site in the U.S. — in addition to other Japanese assets, for a total of about $1.3 million.
ITX, which is affiliated with Japan heavy industry, construction and consumer goods conglomerate Nissho Iwai, also licensed Promotions.com’s iDIALOG software for use with the Chakkalina.com site. iDialog delivers targeted offers to users as they join promotions and opt-in to marketing messages.
ITX said the purchase would enable it to enter the Internet promotions business, while Promotions.com touted the sale and licensing as less of a divestiture than the opening up of a new growth opportunity.
“This deal further underscores the tremendous value of our proprietary iDIALOG technology,” said Promotions.com chairman and chief executive Steven Krein. “These types of agreements create additional revenue streams for Promotions.com and demonstrates our continued commitment to our shareholders by increasing the value of the company and enhancing our path to profitability.”
The company gave warning as early as October that it planned to scale back its international plans. At that time, the firm cut about 13 percent of its staff, restructured its business units, and closed two offices in an effort to preserve cash.
Last month, Promotions.com said it has started to see a payoff from those cuts, even though it posted a wider fourth-quarter loss than in the previous quarter. The firm posted a loss of $5.9 million before charges for the quarter, and said it has $17.7 million remaining in cash and marketable securities at the end of 2000 — enough, executives said, to carry it to profitability.
Promotions.com hasn’t broken out its costs for its Japanese presence, though it has said its international operations are some of its most costly. Additionally, despite the relative maturity of Internet market in the U.S., the firm has said its Webstakes.com site underperformed for much of late 2000 — casting still more doubt on when Chakkalina.com might have proven lucrative for the firm in the short term. As a result, the reduced expenses and new revenue stream should help it reach profitability — though it has yet to say when it expects to begin breaking even.