ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Thursday, February 22, 1996 TAG: 9602220025
SECTION: BUSINESS PAGE: B8 EDITION: METRO
DATELINE: CHICAGO
SOURCE: ASSOCIATED PRESS
Sears, Roebuck & Co. said Wednesday it will sell its 50 percent stake in Prodigy Services Co., the nation's third-largest on-line service, to focus on retailing.
``Prodigy does not fit into Sears' long-term strategy for growth. We are seeking a buyer for Sears' share in the company,'' Arthur C. Martinez, Sears chairman and chief executive, told financial analysts in New York.
Prodigy, created in a joint venture between Sears and IBM Corp. in 1984, helped build the on-line computer industry and now has 1.5 million subscribers. But the company has been slow to adapt to user preferences and has been overtaken in the last two years by America Online, with 5 million subscribers, and CompuServe, with 4.3 million subscribers.
Sears stock rose 62 1/2 cents in trading on the New York Stock Exchange to $42.75. IBM shares fell 25 cents to $118.87 1/2.
Sears reportedly began seeking several months ago to sell its stake, either to IBM or another buyer. After being rebuffed in its bid to recoup its estimated $600 million share of Prodigy's start-up costs, the retailer now is asking for about $300 million, said Peter Krasilovsky, senior analyst for Arlen Communications, a consulting firm for new media.
``Sears originally invested in Prodigy because they believed home shopping would be a tremendous driver, but that home shopping segment never really took off,'' Krasilovsky said. ``Their announcement today really was to tell shareholders Sears knows it has a dead fish on its hands and they're going to dump it and never look back.''
Prodigy spokesman Barry Kluger said a sale of Sears' stake could bring a buyer with more cash to expand the on-line service.
``Sears' decision to seek a buyer resolves a long-standing issue. For Prodigy, it presents a wide array of viable and exciting options, all designed to continue to grow and enhance the asset,'' Kluger said.
IBM must decide whether it wants to keep Prodigy. The company provides other on-line services, connecting to private networks as well as the public Internet, to businesses. But Prodigy is designed for home use.
IBM spokeswoman Tara Sexton said: ``We've said for a long time we're still evaluating the ownership structure, but nothing has changed in terms of our ownership position.''
Separately, Sears said it plans to boost capital spending in 1996 to $1.6 billion from $1.4 billion. The retailer will open 285 to 350 stores and remodel 90 to 100 stores.
The company also said it expects ``middle-single digit'' same-store sales growth in 1996.
LENGTH: Medium: 54 linesby CNB