InfoSpace.com acquires Inex for $45m

Another online storefront software vendor has been gobbled up by a bigger, stronger Web player.

Monday morning, Inex announced it is being acquired by InfoSpace.com for 900,000 shares of InfoSpace stock. Using current trading prices, the deal is worth an estimated $45m (£28m).

Inex is a maker of low-cost software used by merchants to build their electronic storefronts and catalogues.

Inex appeared to have gained market momentum over the last year. In 1998, PC market leader Compaq Computer agreed to bundle Inex software on all of its ProSignia desktop and laptop computers. Inex had signed contracts to deploy 50,000 stores for the coming year, said company CEO Alex Barrotti.

Still, Barrotti had concerns about the long term. "I'm not sure that, in the next five years, storefront solutions all by themselves are going to do well in the marketplace," he said.

Indeed. While storefront software vendors such as Mercantec and Intershop Communications appear to be doing well, many others have disappeared, snapped up by industry heavyweights just as they were starting to wobble financially. Most notably, iCat was purchased by Intel after iCat saw slumping sales and an exodus of developers to other companies.

Small companies such as Inex face major challenges in today's market, Barrotti said. Store-building software has become a bit of a commodity. Portal sites such as Yahoo! offer store hosting services for less than $20 per month. And even higher-end e-commerce software from companies such as Microsoft and IBM is edging into the low-cost arena.

And most companies want more than just good storefront software. They want personalisation. They want payment processing. They want a bundling of services that are easiest for a large company to deliver. That's a lot for a small company like Inex.

Founded nearly three years ago, Inex has only 44 employees. Inex software is low-cost -- even its Professional version sells for less than $1,000 -- and was designed from day one for the nontechnical business manager. It sells its software under private label to other companies. That is, if a hosting company signs a deal with Inex, the host can market that software to its customers under its own brand.

InfoSpace.com is the type of company that is usually an Inex customer. It offers private label content and e-commerce services to more than 1,800 Web sites, including America Online, Netscape Communications' Netcenter, Microsoft, Lycos, ABC, and the Wall Street Journal Interactive Edition. It also has deals with a number of Internet access device makers, such as AT&T Wireless and UnWired Planet. Its first e-commerce service, called ActiveShopper, was recently launched on more than 700 Web sites.

In short, InfoSpace.com has the kind of market clout that Inex could never have expected to have on its own.

"For us, this is a way to offer a lot more services while supporting the existing base," Barrotti said. InfoSpace.com plans to relaunch Inex's Web-based ezStore as InfoSpace.com StoreBuilder, a one-stop shop that merchants can use to set up, design, host and promote a Web site.

The deal is expected to be finalised within the next four weeks. The Inex office in Toronto will become an InfoSpace.com sales office. Barrotti will move to Redmond, Wash., to help integrate his products into the rest of the company. No significant layoffs are expected.

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