Analysis: Was Eisa doomed from the start?

Bad luck may have less to do with Eisa's failure to acquire ISP giant OzEmail than bad planning.

While IT industry analyst Paul Budde has labelled Eisa's tactics in the lead-up to acquiring OzEmail as "arrogant", IDC analyst Graham Penn forgives Eisa's "naivete" due to the overall innocence of the internet economy.

Internet company Eisa was officially bounced from the OzEmail acquisition discussion table yesterday when OzEmail parent UUNet released a statement announcing it no longer planned to go through with the sale of the 350,000-customer ISP due to Eisa's inadequate funding.

Eisa failed to provide proof that it had access to half the necessary funds to pay for the ISP, Australia's second largest, before a mutually agreed deadline last month.

The deal fell into further strife earlier this week when Fairfax online division f2 announced it would no longer contribute a vital $40 million in funding to the deal.

Soon after, Eisa announced the resignation of two top executives, which saw company share prices immediately plummet below 30 cents -- less than 10 per cent of their value just two months ago.

"(Eisa CEO) Damien Brady was very confident that he always had money in his pocket. Perhaps inexperience led him to believe that he could pull it off," Budde said. "If he had done the deal straight away, he might have found himself in a much better position.

"I think it's a combination of inexperience, a bit of arrogance and the Nasdaq that brought him down," he said.

IDC analyst Graham Penn described Eisa's proposed business plan as simply "unrealistic".

Despite the impending array of services offered by the various players in the proposed deal -- which included f2, Disney, ANZ and Mike Fitzpatrick Hastings Fund Management -- Penn said Eisa had never properly outlined how it expected to draw sufficient revenues to justify the acquisition.

Penn said the Eisa/OzEmail debacle was just one of many to come in the inevitable consolidation of the IT market.

"Unless you have very wide tentacles, you can't properly stand alone," he said, adding that both Eisa and its financially estranged partners would learn a valuable lesson from the failed acquisition.

"They will have a better understanding of the upside, but also a better understanding of the downside," he said.

Meanwhile, www.consult's Ian Webster said it was likely UUNet would seek to find another buyer for OzEmail "sooner rather than later".

"I'm sure all parties are aware that it's not good for OzEmail to be left hanging . . . in terms of their retention rates and acquisition rates of their members. The sooner they resolve this, the better," he said.

"I think we'll see something fairly soon."

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