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Internet MP3.com takeover gets go-ahead



Internet: Shareholders OK Buyout by One-Time Foe

MP3.com, Inc. ended life as an independent, publicly traded company last week as shareholders approved French conglomerate Vivendi Universal’s takeover of the Internet company.

Vivendi moved to name MP3.com’s 44-year-old president, Robin Richards, chairman and CEO of the company, which will keep its name and San Diego base.

Richards succeeds Michael Robertson, the company’s charismatic founder, who will now serve as an adviser to the parent company’s chief, Jean-Marie Messier. One published report said Robertson was also forming a new, San Diego-based company called Lindows.com. Lindows did not respond to an e-mailed request for comment.

MP3.com distributes music over the Web. It was incorporated in March 1998. In its early days, MP3.com positioned itself as a way for bands not affiliated with major labels to get their music to the masses.

The company “rapidly and efficiently expanded on that vision” to subscription services and in-store music, noted Susan Kevorkian, a research analyst with International Data Corp. in Mountain View.

Shortly after its July 1999 initial public offering, MP3.com encountered legal troubles with another product, a “locker service” which streamed major-label content to Internet users. Vivendi Universal was one of five major record labels that sued MP3.com over the concept, and was the last label to reach a legal accord with MP3.com.

Kevorkian called those legal battles a “David and Goliath” story. The fact the largest label went on to buy MP3.com is proof MP3.com was successful in its mission, she said.

An MP3.com spokesman said last week the company has “no plans” to lay off employees, though that contradicted one published report saying the company would cut less than 5 percent of its 300-person staff.

Vivendi bought MP3.com shares for $5 apiece, paying in both cash and stock.

That stands in contrast to July 21, 1999, when MP3.com’s $346 million initial public offering brought shares to market at $28 apiece. The shares rocketed to $105 on their first day of trading before closing at $63.31.

By one account, the value of Robertson’s stock increased $868 million in that one day.

By July 2000 MP3.com shares traded in the range of $9 to $14. They reached a low of $1.50 in April. Vivendi announced in May it would pay $5 per share for the stock, or $372 million in total.

MP3.com’s 25-month run on the stock market “mirrored the roller coaster ride we saw on the Internet,” said Lee Black, director of research for Webnoize, a market analysis firm in Cambridge, Mass.

Black and Kevorkian agreed that one of most important assets Vivendi acquires in the deal is MP3.com’s technological infrastructure. Both said it is scalable, flexible, extensive , and something that would be difficult to replicate.

Vivendi Universal will use MP3.com’s technical know-how in a new service called Pressplay. Previously known as Duet, Pressplay is an online music company formed by the company and an unrelated music label, Sony Music Entertainment.

The MP3.com name is another important asset for Vivendi, the analysts said, since the company takes its name from a popular Internet file format.

Last week’s transition to Vivendi was assured since Robertson, Richards and Sequoia Capital owned a majority of MP3.com stock and assured Vivendi it would vote for the takeover, according to a proxy statement filed in late July.

The document said the three owned or had options to own 53.7 percent of the shares.

Robertson, with 23.4 million shares, was the company’s largest stockholder, the statement said. He held 33.9 percent of the company.

Richards , who follows Robertson as chairman and CEO , will receive $5.5 million for staying with the company and agreeing not to compete with it for one year, according to the proxy.

Additionally, he will receive $400,000 for six months of work in the top job. Following that, he will work month-to-month at the company’s discretion.

Before he joined MP3.com in 1999, Richards was managing director of Tickets.com, Inc., and was founder, president and CEO of Lexi International.

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