NBC to buy up struggling Internet affiliate

General Electric Co.'s National Broadcasting Co. (NBC) network Monday announced plans to bring its struggling Internet affiliate back in-house, making it the latest in a string of companies that are folding Web-based business units back into their regular operations.

NBC, which currently owns 39 percent of San Francisco-based NBC Internet Inc. (NBCi), said it has agreed to buy the rest of the Web portal venture for about US$85 million. The future of the unit within NBC is unclear, though: The New York-based network said it's still "in the process of determining how NBCi's assets will be utilized."

In addition, NBC said the online unit will immediately begin laying off more workers "as it prepares to scale down the business." That follows a 30 percent workforce cutback that NBCi made in January after its revenue fell well below expectations.

NBCi was launched two years ago as a public company that operated a portal Web site providing news, entertainment services, online shopping and other features. But the venture was hit hard by the dot-com meltdown, with advertising on its site growing much more slowly than expected.

When the January layoffs were announced, NBCi lowered its revenue forecast for this year from $150 million to just $100 million. In February, it reported a pro forma net loss of $187.5 million for all of last year on revenue of $122.9 million. The financial woes dropped the price of the company's stock to less than $2 a share prior to Monday's announcement.

Bob Wright, vice chairman of General Electric and NBC's president and CEO, said in a statement Monday that changes in the e-commerce landscape and the market for online advertising "have caused us to re-examine [the NBCi] initiative." The purchase is expected to be completed this summer, pending approval by NBCi's shareholders.

"Monday's declining market conditions in the Internet space have made it difficult for NBCi to remain competitive," said Will Lansing, the online venture's CEO. "Rather than continuing to operate at a significant loss, and having the value of NBCi continue to erode, we believe this transaction is in the best interest of NBCi's public stockholders."

NBC is far from being alone in pulling money-losing e-commerce ventures back into the corporate fold. Last month, for example, office-supply retailer Staples Inc. announced plans to combine its e-commerce affiliate with a brick-and-mortar catalog operation aimed at small businesses and consumers

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