In a bid to strengthen its position in the wireless industry and expand its influence overseas, Internet infrastructure provider InfoSpace.com announced it signed a definitive agreement to acquire wireless Internet portal Saraide Inc.
According to the agreement, InfoSpace.com will issue about 2.4 million shares of its common stock to existing Saraide shareholders. Analysts have valued the shares at about $348 million. InfoSpace then will control 80 percent of the combined company.
According to the agreement, Saraide’s chairman and chief executive officer, Hatim Tyabji, will become president of InfoSpace’s Wireless Services division, while Arif Janjua, formerly Saraide’s general manager of North American operations, will lead InfoSpace’s Consumer Services division.
InfoSpace provides various Internet portal sites with directory services, e-commerce platforms and other content on a private-label basis. Customers include Yahoo!, Lycos, MSN.com and others.
As wireless carriers begin offering more Internet content on the devices supported by their networks, they are expected to aggregate their own portal content. InfoSpace said it plans to meet that need.
“We have seen momentum expand for our wireless services,” said Naveen Jain, InfoSpace chairman and chief executive officer, adding he expects 40 percent of the company’s total revenue to come from wireless services next year. “With this acquisition … we’ve got all the pieces in place,” for InfoSpace’s global strategy, he said.
Saraide was formed as a joint venture between Global System for Mobile communications carriers Microcell Telecommunications Inc. and Omnipoint Communications Inc., as well as Nortel Networks and GSM Capital L.P. Other investors include Aerial Communications Inc., Celcom, Deutsche Telekom AG, Esat Digifone, France Telecom Group, Singapore Telecom and SmarTone.
Saraide in June purchased GSM Information Network BV, a value-added services provider based in the Netherlands, giving it European content services to complement its North American interests.
Steve Shivers, general manager of InfoSpace’s wireless and information appliances group, said by acquiring Saraide, InfoSpace adds relationships with 21 wireless carriers in Europe, Japan and Canada, as well as the content providers in those regions.
“We’re still providing a private label end-to-end portal solution,” he said. “This broadens our geographic reach. It also strengthens our capabilities in North America with the applications and things they’ve been working on, which will evolve into our offerings.”
In addition, InfoSpace expects one-third of its growth to be international, given the pan-Atlantic nature of recent telecom mergers such as Vodafone AirTouch plc and MCI WorldCom Inc.
“The carriers are becoming super-national players, with all the mergers and such,” Shivers said. “It’s a natural for us to provide them a full global Internet solution,” that will allow end users to roam internationally without losing InfoSpace services.
Of the services InfoSpace hopes to provide wireless users, the ability to conduct e-commerce transactions is a priority, the company said. In that effort, InfoSpace also purchased Prio Inc., an e-commerce solution provider. Ashok Narasimhan, Prio chairman and CEO, will lead InfoSpace’s Merchant Services division.
Jain said he wants to set up an e-commerce environment where users can either buy or sell things from their wireless devices, but also use the phone as an electronic coupon of sorts, driving customer traffic to stores.
“Eight out of 10 consumers browse for products online, but go to a brick-and-mortar store to make the purchase,” he said.
Prio offers coupon promotions that, when integrated with wireless capabilities, will allow InfoSpace to offer electronic coupons sent to wireless devices that can be redeemed at stores through Prio’s relationships. A wireless coupon service could track what the consumer buys offline. “That’s very, very powerful stuff,” Jain said.
Wall Street reacted positively to the announcement. InfoSpace stock soared $24.68 to $173.68 the day of the announcement. InfoSpace announced in late November it would initiate a two-for-one stock split on Dec. 15.
