Sale Goes Before Bankruptcy Judge

Kmart on Friday filed a motion with its bankruptcy judge to
sell the assets of its Internet service provider (ISP) arm and 165,000
customers to United Online for $8.4 million. will not go away, at least in name, anyways. According to
the bid offered by United Online, Kmart will still brand the
service and pay United Online a commission for every customer it signs.

The deal is a good one for Kmart, as it provides a pipeline for its ISP
customers into the company’s e-commerce site, which was the reason was created in the first place.

The retail giant restated its commitment to the online shopping portion of
its web site. According to Dave Karracker, customers bring
in, on average, more revenues than the regular Web surfer looking for an
online deal.

“We’ve found that customers have bigger (online) baskets and
generally spend more at,” he said.

Kmart expects the court to sign off on its disposal on or around Oct. 30.

According to United Online sources, the sale wouldn’t affect any customers. subscribers who decide not to move
onto the United Online network, however, will have to find connectivity on
their own.

Last month, Kmart officials announced they were shutting down the service
in order to cut back on costly operations in the wake of its Chapter 11
bankruptcy filing
, which immediately raised questions of’s viability. The assets of were put on the
block, and the speculation at the time tabbed United Online as the likely
winning bidder
. as an ISP entity was scuttled
back in June
, when the company redirected the URL to and
stopped taking on new customers. Pending approval of the United Online
bid, however, the site will be re-established and start taking on new
customers immediately.

The bid includes the ISP and e-mail services at and puts the
lid on the coffin of one of the few remaining ISPs to originally offer free
ISP services. In the mid- to late-1990s, several free ISPs popped up around
the country, offering free connectivity in lieu of advertising.

While many of these ISPs relied primarily on the ad banner to pay for the
ISP service,’s strategy seemed to make the most sense,
requiring users to make monthly online purchases at the KMart online site.
Given the popularity of the retail company in the “real world,” it was
expected the sales online would follow.

For a while it did, and even managed to buy up the
company providing it wholesale Internet services — Spinway — back in
2000. But the costs inherent in an ISP operation soon caught up, and was forced to start charging for the service. The ISP was
later brought back into the KMart fold, its
workforce reduced

Kmart’s decision to put an end to managing its ISP arm came down to
economics, and exacerbated by the bankruptcy’s proceedings need to cut out
ancillary operations.

“It was more about us providing a valuable service and the fact Kmart needs
to focus on its core competencies,” Karracker said. “We thought it was
better to sell it now to a company that is very good at what it does, and
if the deal is approved with the courts, we’ll still be able to offer at service.”

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