Microsoft Corporation (Nasdaq: MSFT) will buy out the 50.1% stake in MSN Israel which is held by Internet Gold Golden Lines Ltd. (Nasdaq: IGLD; TASE:IGLD) though subsidiary Smile Media Ltd. and become the sole operator of the portal beginning in October 2008.
Sources inform ''Globes'' that MSN Israel general manager Shraga Mor is resigning and a third of the company's personnel will be fired. Mor confirmed the report about his departure. Deputy general manager Zvika Sheinfeld will head the transition administration that will run the portal in its new format until its relaunch under exclusive Microsoft ownership in three months. Internet Gold CEO Eli Holtzman will continue as MSN Israel chairman during the interim.
Microsoft and Internet Gold are currently discussing the terms of migration and possible future cooperation. The MSN Israel portal will continue to operate throughout the transition period and the companies are working together to support employees, advertisers and users through this period.
MSN Israel was established in 2000 and became one of Israel's top portals from the beginning. However, the portal has taken some severe hits recently, including waves of layoffs and a slump in its weekly exposure rate, which according to the monthly TIM/Teleseker survey was 25.3% in May, putting the portal in seventh place.
MSN is a global portal network that operates in 44 countries. Microsoft fully owns most of the MSN portals in these countries, and only in a very few instances joined forces with a domestic partner to establish a local MSN portal. In 2007, MSN Israel accounted for less than 3% of Internet Gold's total revenues.
Holtzman said that the company decided to seek alternative growth engines given MSN Israel's very small contribution to the company's revenue.
Microsoft Israel general manager Danny Yamin said, "Our relationship with Internet Gold has worked well to establish strong foundations for our online business but both parties now feel that the time has come to operate independently to allow us both to deepen our impact on the Israeli market."
Internet Gold's decision to sell its MSN Israel stake was probably prompted by the company's first quarter financial results. The company posted NIS 279.6 million revenue for the first quarter, 5.6% less than the NIS 296.3 million for the corresponding quarter of 2007. Revenue of subsidiary 012 Smile.Communications Ltd. (Nasdaq:SMLC; TASE: SMLC) fell 4.7% to NIS 263 million from NIS 276 million for the corresponding quarter.
Published by Globes [online], Israel business news - www.globes-online.com - on July 6, 2008
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