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September 27, 1998

PRODIGY FILES FOR IPO

By CBR Staff Writer

Prodigy Communications Corp has filed with the Securities and Exchange Commission for an initial public offering of common stock. The offering size and estimated price range have not been disclosed. The float is expected some time after November 1998, with Bear, Stearns & Co lead-managing the offering. The online service was established in 1984 to peddle custom content, email and chat based on proprietary technologies. It achieved national distribution in 1990 and through the early nineties was seen as one of the main rivals to CompuServe and America OnLine. The real threat, however, lay elsewhere. Like the other proprietary online services, Prodigy was caught flat-footed by the surging popularity of the internet. In October 1996 the company finally launched Prodigy Internet, a standards-based internet access service. It outsourced its network and customer service desk and abandoned work on custom content. While none of these measures could make Prodigy profitable, they did help reduce its fixed operating costs and headcount. Prodigy now enters a crowded and highly competitive market. To succeed as an internet access provider it must go head to head with EarthLink, MindSpring, Microsoft Network, AT&T WorldNet, MCI Internet, IBM, PSINet, GTE, Netcom and Concentric, to name a few. Nor is that the only challenge the company must face. Subscriber churn is high; Prodigy is forced to rely on its third-party providers and additional financing is urgently needed – hence this float. All in all, Prodigy is not exactly the red-hot IPO of the year. On the other hand, it seems unlikely that such mundane considerations will affect the market one way or the other.

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