ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Thursday, February 22, 1996 TAG: 9602220007
SECTION: BUSINESS PAGE: B6 EDITION: METRO
DATELINE: NEW YORK
SOURCE: ASSOCIATED PRESS
What better business these days than the on-line industry? It's glamorous, out on high-tech's cutting edge and ought to attract many more customers.
But the decision announced Wednesday by Sears Roebuck & Co. to sell its 50 percent stake in Prodigy Services Co., one of the industry's pioneers, is the most ominous sign yet that the cyberspace business is treacherously unsettled.
For all the hype about the on-line world, almost no one is making money in it. Big-dollar investments are needed to sustain growth, but executives have grown increasingly anxious about spending the money, fearing that an unseen advance in technology might render the effort worthless.
No one publicly admitted interest in Sears' stake in Prodigy on Wednesday, although IBM, which owns the other half, has hired investment bankers to figure out what the business is worth.
Since the start of 1995, Prodigy has gone from a close No. 2 to a distant No. 3 in number of subscribers. The previous third-place company, America Online Inc., has taken a commanding lead.
More important, however, is the threat to the on-line business from the Internet's World Wide Web, which has emerged as a common arena for data that can be used easily - and more cheaply - by publishers and consumers of information.
So-called ``content'' companies can use the Internet to reach the most people and avoid the expense of preparing information for on-line services, which have a hodgepodge of software and technical requirements.
``The Web came through and blasted everyone around,'' said Maureen Fleming, analyst at Digital Information Group in Stamford, Conn. ``IBM, AT&T, America Online, Microsoft, all of them are trying to figure out how they can survive in this environment.''
Microsoft Corp., for example, changed the structure of its Microsoft Network just four months after it was launched. The changes align it closely with the Internet.
Ironically, Prodigy was the first major on-line service to recognize the changes the Internet wrought.
A year ago this month, it became the first to provide subscribers Web-browsing software. It later changed its main connection software, or interface, to work just as the Web does, linking easily to other information by clicking on a highlighted word. No one else has done so.
But Prodigy has a nonglamorous reputation due to stodgy marketing and long delays in giving the Web-browsing software a contemporary look.
``Prodigy just hasn't been able to get a strong enough message out there that they are a gateway to the Internet,'' said Stephen Auditore, president of Zona Research Inc. in San Francisco.
The uncertain ownership fate of Prodigy comes amid major upheavals in most other on-line companies.
Just this month, News Corp. scrapped a year of development in an Internet service, laying off half the 500 people working on it. Partner MCI Communications Corp. cut its investment and said it would work more closely with Microsoft in on-line ventures.
Apple Computer Inc.'s new chief executive, Gil Amelio, has placed its eWorld on-line service under scrutiny.
AT&T Corp. last month halted development of the budding Interchange on-line service, just 13 months after spending $50 million to acquire it from Ziff-Davis Publishing Co.
H&R Block Inc. lost money in its latest quarter because of heavy capital spending at CompuServe Inc. and said Tuesday it would spin off the subsidiary. Even the fast-growing America Online squeaked out just a $10 million profit on $250 million in revenue in its latest quarter.
Although Sears had been rumored to want out of Prodigy for months, its disclosure was unusual. Companies typically say nothing about a prospective asset sale until a buyer is found.
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