ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Wednesday, February 21, 1996 TAG: 9602210036
SECTION: BUSINESS PAGE: B-6 EDITION: METRO
DATELINE: KANSAS CITY, MO.
SOURCE: Associated Press
After months of pressure from shareholders who thought their stock was undervalued, H&R Block Inc. said Tuesday it would spin off its CompuServe Inc. on-line services company.
Block said it will make a public offering of less than 20 percent of CompuServe stock in April. It will distribute its remaining ownership through a tax-free spinoff or split-off within about a year.
CompuServe would become the second stand-alone on-line services company. The other is its larger rival, America Online Inc.
Kansas City-based Block, the nation's largest tax preparation service, also reported a loss of $5.5 million, or 5 cents per share, for the quarter that ended Jan. 31. Revenue rose 16 percent, to $312 million from $268 million.
Block said the loss resulted from heavy spending at CompuServe in marketing programs and expansion, including development of a second on-line service. A year ago, H&R Block earned $8.1 million in the same quarter.
Investors had sent H&R Block's stock up $2 to close at $41.871/2 on the New York Stock Exchange.
Analysts said Block's stock has been undervalued by Wall Street, and saw the spinoff as a way to realize that hidden value.
Paul Mackey, an analyst at Dean Witter Reynolds in New York, said he was not worried about the prospect of volatile earnings.
``The tax business has been a steady, consistent, 7 percent grower, year in and year out,'' Mackey said. ``And there's still a long way for Block to grow. It's nowhere near mature. They only do one in seven returns.''
LENGTH: Short : 38 linesby CNB