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Comcast, QVC Buy More of Sports E-Retailer

9/02/2001 8:00 PM Eastern

Comcast Corp. and its shopping-channel unit, QVC Inc., have upped their stake in online sporting goods retailer Global Sports Inc. — and may have set the stage for an increased electronic-commerce presence for other Comcast content properties.

According to the deal, which closed last Monday, Interactive Technology Holdings LLC — a joint venture company formed by Comcast and QVC — will buy about 4 million shares of Global Sports at $10 per share.

Global Sports said it would issue about 3 million new shares for the deal. The other 1 million shares will come from Global Sports CEO Michael Rubin.

Jeff Branman, president of Interactive Technology Partners, the adviser to Interactive Technology Holdings, would not go into specifics about future opportunities with Global Sports. "I would stay tuned on that," he said.

When asked if Global Sports could provide services to other Comcast content networks — particularly Comcast SportsNet and other sports holdings — Branman would not rule out the possibility.

"You're clearly thinking logically along the same lines that we would be thinking," he said.

QVC referred questions on the deal to Branman.

Global Sports has already forged an agreement to operate Fox Sports Net's e-commerce site.

There are still opportunities in e-commerce, said CIBC World Markets analyst John Corcoran, even though several companies that have attempted to cash in on services connected to sports programming have gone by the wayside.

"It's not as though people haven't tried," Corcoran said, referring to companies like Quokka Sports Inc., which filed for bankruptcy in April. "There may be an opportunity there, but it's not an immediate opportunity."

STRONG PERFORMANCE

Unlike some of its dot-com peers, Global Sports has shown strong performance.

In the quarter that ended June 30, Global Sports reported revenue of $17 million, more than double the $7.8 million in the same period last year. Net losses also improved, to $5.4 million (17 cents per share) compared to $11.2 million (54 cents per share) in the second quarter of fiscal 2000.

"We think their business model is superb and is very strategic to where we think the Internet and television may be converging," Branman said. "We like their abilities, which are rather unique, to take somebody else's retail or consumer brand and within a matter of weeks have a great Web site up and running."

Comcast and QVC first announced the deal in late July, when Global Sports was trading at about $9.08 per share. The stock has been on a roller coaster ride ever since, rising to $19.26 on Aug. 21. The stock closed at $13.98, down 52 cents, on Aug. 28.

Comcast and QVC already owned about 5 million shares of Global Sports stock; the most recent deal increases that stake to 9 million shares, or about 25.8 percent of Global Sports' outstanding equity. Investment funds affiliated with Softbank Holdings Inc. own 8.7 million shares, or 24.8 percent. Rubin reduced his holdings to 7.1 million shares, or 20.2 percent.

Global Sports has been operating readysetsports.com, the sporting goods Web site of iQVC — QVC's Internet site — since last October.

Global Sports handles all warehousing, inventory and merchandising for products sold on readysetsports.com. Customers can also combine their purchases from readysetsports.com with ones they make from the iQVC site.

The deal does not include any future involvement with the QVC television-shopping channel's interactive efforts, though Global Sports spokeswoman Patricia Henderson said that anything is possible.

"At this point, it is not what we're considering," Henderson said.

Global Sports also will fatten its cash reserves through the deal. According to a press release issued July 23, Rubin said that thanks to the transaction, the company would end the year with about $100 million in cash as a result of the deal.

"This was not a financially driven situation," Henderson said. "They [Comcast and QVC] wanted to increase their holdings in the company."

COULD INVEST MORE

Comcast and QVC have an option to increase that stake even further, Henderson added. When the two first invested in Global Sports last September, Comcast and QVC also obtained warrants to purchase an additional 4.8 million shares of Global Sports at prices between $6 and $10 per share. Those warrants have not been exercised, she said.

"As a larger stakeholder through its joint venture, we believe Comcast and QVC will be better-positioned to leverage their assets and capabilities to help drive growth opportunities for Global Sports," said Rubin in a prepared statement. "I am confident in the prospects of the company, including our continuing expectation to achieve pro forma profitability in the fourth quarter of 2001 and pro forma profitability on a full-year basis in 2002."

Rubin started Global Sports in 1991 as KPR Sports International Inc., an off-price sporting goods distributor. The company later designed, marketed and distributed the Yukon and Ryka Inc. lines of footwear.

In 1998 — after KPR Sports and Ryka merged to form Global Sports — the company jettisoned its sporting-goods distribution business to focus on electronic commerce.

September