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WorldGate sells assets, refocuses on vid phone

Wed, 08/06/2003 - 8:00pm
Karen Brown

WorldGate Communications Inc. is making an about-face, selling off much of its interactive TV business to interactive programming guide consortium TVGateway LLC as it dives down a new path as a videophone technology provider.

As a result, WorldGate President Gerard Kunkel has announced he will resign to pursue other interests.

The struggling interactive TV software provider has entered a definitive agreement to sell certain television intellectual property rights to TVGateway, a consortium backed by cablers including Adelphia Communications Corp., Comcast Corp. and Cox Communications Inc. WorldGate also was a partner in TVGateway, and as part of the agreement, it will sell back that equity investment to the consortium.

Total sale price for the assets is $3 million, to be paid in cash, with $600,000 paid up front, and the remaining $2.4 million paid at closing, expected in September or October.

WorldGate will use the money to fund its operations and product development. The $600,000 installment and WorldGate's own remaining cash on hand will be enough to keep the company going until the deal closes.

The deal has been approved by the company's board and is pending approval of shareholders.

Under the sale agreement, TVGateway also will provide a license back to WorldGate, allowing it to continue providing interactive cable television data feeds and network monitoring for its clients using the technology it originally developed. WorldGate also will retain certain rights to its designs and technology, as well as inventory, contractual rights and most of its other assets.

Meanwhile, WorldGate will refocus its efforts toward development of a videophone designed to work with existing broadband networks. But the company also will undergo "significant personnel reorganizations, intended to reduce its operating costs and improve efficiencies," according to a release.

At the same time, WorldGate also released its second-quarter earnings results, posting revenue of just $400,000 for the quarter, a $1.8 million drop compared to first-quarter revenue. Much of that drop was blamed on transfer of operations and employees to TVGateway during the period and the resulting drop in income from TVGateway.

Losses for the quarter totaled $3 million, up $1.1 million compared to the first quarter.

While revenue-generating units did increase for WorldGate, fueled by Charter Communications' launch of interactive service in Willimantic, Conn., the company also saw several operator customers terminate their contracts after the end of the quarter because of their concern for WorldGate's financial position, according to the earnings release.

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