Prodigy Aims to Revive Itself in Merger
Prodigy Services Inc., the struggling online computer service recently orphaned by Sears and IBM, said Monday that it has agreed to merge with International Wireless Inc., forming a new company called Prodigy Inc.
International Wireless, a privately held company in Cambridge, Mass., and its investors led the management buyout of Prodigy Services Co. from its owners, International Business Machines Corp. and Sears, Roebuck & Co., in May.
The new company will consist of the Prodigy service and International Wireless’ international cellular phone and international Internet properties.
Prodigy, which will continue to be based in White Plains, N.Y., was founded in 1984 as a regional operation. Although not the oldest of the major online services--CompuServe Inc. was launched in 1979--Prodigy was viewed by many as the first such service for consumers.
But it fell far behind CompuServe and another rival, No. 1 America Online Inc., and is now ranked a distant fourth, with about 1 million members, behind those two and Microsoft Network.
In February, Sears announced that it wanted to sell its stake in Prodigy.
By May 13, the company was on its own, with an estimated price tag of $200 million.
Prodigy has said it is moving to the Internet’s World Wide Web in the fall in an attempt to revive its fortunes, following moves by the other major services, which are themselves competing with Internet access providers.
Telephone companies AT&T; Corp. and MCI Communications Corp. are among those selling direct access to the Internet.
The new Prodigy will be headed by Paul DeLacey, president of International Wireless. He will report to Chairman Gregg Carr.
Carr and DeLacey founded International Wireless two years ago. Grupo Carso of Mexico is a major investor in International Wireless.
Prodigy also said it formed a new company called Prodigy Ventures Inc., to be headed by former Prodigy Chief Executive Ed Bennett. Bennett was named chairman and president of Prodigy Ventures, reporting to Prodigy’s new board.
Prodigy Ventures will serve as an investment fund for Prodigy and a varied group of investors.
Prodigy Ventures, which will be headquartered in the heart of New York’s “Silicon Alley” new-media district, will explore developmental alliances, investments and acquisitions in entertainment, content and technology.
Bennett, who helped launch the cable TV channel that became Comedy Central and led Viacom Inc.’s cable TV division, was chosen in May 1995 to try to turn Prodigy around.
In his new post, he will look for possible investments in start-up companies that fit Prodigy’s strategy.
Bennett declined to say how much capital will be invested in Prodigy Ventures. He said he will be making investments in many start-up firms.
“If you look at how venture capital funds work, if you invest in 10 companies, you hope one of the 10 will be a spectacular success,” Bennett said.
“You have to have multiple investments; you don’t want to bet the ranch on one,” he said.
