Switchboard Gains on AOL Alliance

Switchboard (Nasdaq: SWBD) rose 11/16 to 5 Monday after the company, which operates an Internet directory, announced an alliance with America Online (NYSE: AOL) that could include the Internet giant taking a stake in Switchboard.

The companies said the multi-year, multimillion-dollar agreement covers technology, marketing and services. Westboro, Massachusetts-based Switchboard and AOL, of Dulles, Virginia, will collaborate on developing a set of directory and advertising products to be featured on "key" AOL properties, starting with Netscape and Compuserve.

Switchboard said it paid AOL US$13 million at the signing of the agreement, and will pay an additional $13 million by March 11, 2002, in return for a share of the advertising revenues generated from the agreement. AOL, meanwhile, will pay Switchboard at least $2 million in consulting fees.

Switchboard also said it has issued AOL 746,260 common shares, and agreed to issue another 746,260 after two years, if the directory agreement continues, and another 746,260 shares if the agreement continues after three years. If the companies renew the agreement for another four years after the initial term, AOL will be able to purchase more Switchboard shares.

The deal makes Switchboard the exclusive provider of infrastructure services and directory technology for the new AOL yellow-pages products. Switchboard will also integrate links to Netscape's NetBusiness Cards, a locally targeted small-business initiative.

AOL's local and national sales force will "actively market" ads for the platform, the companies said.

Switchboard chief executive officer Doug Greenlaw said the alliance will create a directory platform that will provide local merchants with online advertising products and services and "the consumer visibility required to establish a powerful online presence."