Juno, NetZero set to merge

The Associated Press
Friday June 08, 2001

LOS ANGELES — Former bitter rivals NetZero and Juno Online Services, the two biggest providers of free Internet access, said Thursday they will merge in a deal that is expected to create the nation’s second-largest Internet connection company. 

NetZero of Westlake Village, Calif., and Juno Online Services of New York announced the deal after close of market. 

The two would share 7 million subscribers and would be larger than the online access arms of Microsoft, Earthlink and AT&T, company executives said in a statement. Only AOL would be bigger. 

Under the terms of the all-stock transaction, NetZero and Juno will become wholly owned subsidiaries of a newly formed company called United Online Inc. 

NetZero stockholders will own about 61.5 percent of the outstanding shares in United Online. Juno stockholders will own the rest, once the deal closes sometime before the end of the year. 

The new company is expected to trade on the Nasdaq Stock Market under the symbol UNTD. 

The deal comes as free Net providers are striving to find new ways to make money and are increasingly dabbling in paid online access services. Traditionally, free providers have made their money through advertising. 

Such an experiment has not saved NetZero from widening quarterly losses. 

The company’s third-quarter net loss, announced in May, grew more than $66 million to $91.3 million, compared with the same period last year. That’s despite a new $9.95-a-month paid service that drew 116,000 customers during that same period. 

Juno, meanwhile, has been offering some paid services for three years. 

The two had clashed in court since late last year, when NetZero sued Juno on accusations of patent infringement. 

The California company alleged that Juno was using unique technology that combines pop-up ad banners and a navigational tool. 

A federal judge lifted a temporary restraining order against Juno in April, though a trial was expected later this year. 

Juno has also taken court action against NetZero. 

In a separate case, Juno filed a patent infringement case against NetZero and Qualcomm Inc. last summer over Eudora e-mail software. 

In that suit, which was also last reported as pending, Juno alleged the Qualcomm-developed program infringes on a patent it holds for software that allows it to continue to display advertisements connected to e-mail messages even when a user’s computer is not connected to the Internet.