The shareholders of web retailer Shopping.com Inc have had a torrid time over the past year or so and are likely to be glad to see their company delivered safely into the arms of the more secure Compaq Computer Corp. Compaq has moved to acquire the financially-challenged ‘etailer’ for $19 per share cash, making an aggregate selling price of $220m in cash, which is not bad for a company that lost $5.7m on sales of just $2m in the third fiscal quarter of 1998. It represents a 44% premium on Friday’s closing price $13.1875. Compaq plans to link Shopping.com to its AltaVista web site to make it into more of a commerce-driven portal and also plans to include an icon on some of its PCs. At present there is a link on the Presario PCs to Compaq’s own web site, but it will probably be changed to Shopping.com in the near future. But is Compaq just paying over the odds for another good domain name, following its alleged $3.4m purchase of AltaVista.com from Alta Vista Technologies Inc last August (08/12/98)? Or does it signal another attempt by AltaVista’s owners to spin it off as a separate company? Compaq insists that it is buying Shopping.com primarily for its superior transactional engine and its broad range of products. And while it does have a great domain name, or natural brand identity as the company calls it, it is the back end that it’s most interested in. And Compaq would not comment on spin-off rumors, saying that it wants to make AltaVista one of the top three sites on the web and by linking it with Shopping.com, it hopes to achieve that. Both sites will retain their own identities. Compaq already has the approval of the Shopping.com board and shareholders that account for around 27% of the outstanding stock. It now needs the approval of the holders of at least 90% of the stock to close the transaction, but there is no deadline by which that has to happen. Corona Del Mar, California-based Shopping.com aggregates more than two million brand names products from more than 1,000 merchants at its site. If it’s not the domain name Compaq is after, $220m cash seems like a lot of money to pay for a company in such dire financial straits as Shopping.com. A quick look at the firm’s balance sheet for the third quarter ending October 31 shows quite how bad things had got. It had just $336,319 cash and equivalents and current liabilities were more than three times that if current assets. But that’s not all. Having gone public on November 1997 at $9 a per share, trading was suspended in March 1998 for a few weeks on suspicion of manipulative practices. The SEC investigation is still proceeding. Then in May the company’s accountants warned in its 10-K filing that there was substantial doubt about the firm’s ability to survive as a going concern. In addition, the shares tanked in late August after the company’s leading market maker stopped trading the shares. It was then trading as low as 97 cents per share. It has pulled itself back up from the brink in terms of share price and yesterday’s announcement predictably pushed the shares up to just under the offer price, closing up $5.40625, or 41.0% at $18.59375. But just last week, the company got its third chief executive in the last seven months when Frank Denny took over from John Markley, who replaced company founder Robert McNulty last June.
