Beyond.com (Nasdaq: BYND), which provides e-commerce software to onlinemerchants and the U.S. government, has filed for Chapter 11bankruptcy and agreed to sell its assets and clientcontracts to e-commerce outsourcing company Digital River(Nasdaq: DRIV).
Digital River CEO Joel Ronning told theE-Commerce Times that synergies between Beyond.comand Digital River make the acquisition a logical step.”It’s really a company that is very consistent withour current business, so it’s a low-risk transactionfor us, but with high rewards,” Ronning said.
Digital River agreed to buy Beyond.com’s assets for US$3.5million in cash and $7.5 million in Digital River stock,which was up 4 percent to $21.17 in midday tradingFriday. Shares of Beyond.com fell 3.7 percent to 79cents on the news before Nasdaq halted trading in the stock. The acquisition is subject to bankruptcy court approval.
Ronning said bankruptcy proceedings could take upto 60 days, after which Digital River will moveBeyond.com’s clients to the Digital Riverplatform. That transition will take another 60 days.
According to Ron Smith, president and CEO ofBeyond.com, the company could not find thenecessary capital to solidify its balance sheet andpay its debts.
The bankruptcy filing “will help to ensure that ourcustomers continue to receive uninterrupted servicethrough the sale process,” Smith said.
From B2C to B2B
Beyond.com, founded in 1994 as Software.net,manages and markets eStores for such clientsas McAfee, ACT! and Sybex.
The company originally opened an online retail storefor computer products, but in January 2000 it shifted itsfocus to providing support for other Web merchants.
In August, Beyond.com launchedan Internet mall to showcase its clients’ eStores. The company received commissions for purchasesmade through the mall.
The new business plan seemed to be working. In thethird quarter, Beyond.com reported a 50 percent risein revenue from its eStores business and a 44 percentincrease in government sales.
When reporting the company’s third-quarter results onOctober 25th, Smith acknowledged that Beyond.com wasconsidering a sale.
Ronning said it was a failure of execution andleadership, not technology, that led to Beyond.com’sproblems.
“This industry is not very forgiving, andthe market does not respond well to second- orthird-place players,” he said.
In addition, according to Ronning,Beyond.com experienced a lot of turnover among its topexecutives, which made execution difficult.
Digital River provides e-commerce technology, includingsite development and hosting, transaction processing,fraud screening, authorization and settlement. The company said it has more than 13,000 clients, including Novell (Nasdaq: NOVL), Symantec (Nasdaq: SYMC),Staples.com and Nabisco.