At&T; Shifts Internet Strategy Merges With Industry.Net

AT&T Corp., shifting its Internet strategy, on Monday formed a company with Industry.Net to run its online information and transaction services for businesses.

The new company, called Nets Inc., will be led by Industry.Net chief executive Jim Manzi and take responsibility for both the AT&T Business Network and Industry.Net sites on the World Wide Web.

Terms of the transaction were not disclosed. It does not affect AT&T’s consumer-targeted Internet service called AT&T WorldNet, which became available in March.

However, it represents at least the fourth structure of an online business service AT&T has attempted in the past two years. By taking a minority stake in Nets Inc., AT&T has a graceful way to exit the business if the company finds that it doesn’t meet its expectations.

Manzi said Nets Inc. will focus initially on getting more businesses to use both Industry.Net and AT&T Business Network and then work on facilitating electronic transactions for its customers.

“The battle right now is about rapid customer acquisition,” Manzi said.

Manzi, former chief executive of Lotus Development Corp., joined Industry.Net last fall, a few months after IBM acquired Lotus. He will be joined at Nets Inc. by Michael Kolowich, a former Lotus executive who has been president of AT&T’s new media services unit.

That AT&T unit was formed in the company’s December 1994 acquisition of the Interchange online service from Ziff-Davis Publishing Co. But AT&T, noticing the growing popularity of the Internet, decided earlier this year to shut it down.

It is writing off the acquisition expense as part of the $4 billion cost of its broader breakup into three companies.

AT&T turned the business-targeted portion of Interchange into a World Wide Web-based service called AT&T Business Network. Subscribers can find financial news and information and links to thousands of businesses that have created their own Web sites.

By contrast, Industry.Net focuses on connecting manufacturing businesses to customers. It has more than 4,500 suppliers who pay $3,000 to $200,000 annually so electronic catalogs of their products can be seen by prospective buyers.

“Meshing those two together may prove difficult,” said Mary Modahl, analyst at Forrester Research in Cambridge, Mass. “They have to figure out what are we? An information provider? A transaction service? Presumably they’ll become some blend of the two.”

Analysts also noted the venture puts the AT&T Business Network, being run by many of the people who developed Interchange, back in the control of a small company that can adapt more swiftly to technical and market changes.

“Everything is so political at AT&T so logical conclusions can’t always be made,” said Maureen Fleming, analyst at Digital Information Group in Stamford, Conn. “I think the new media group was almost paralyzed by the scale they needed to achieve for AT&T corporate to notice.”

AT&T’s John Petrillo, who oversaw the purchase of Interchange, said the company did not make a mistake with the acquisition, valued at around $50 million.

“We had been pursuing the online environment as a vertically-structured proprietary system,” said Petrillo, who will represent AT&T on the Nets Inc. board. “And the open systems (Internet) model prevailed. Many of us went through this education. Upon our coming to grips with it, we made some very clear decisions … and we have got a leading position now in access and hosting on the Web.”

Nets Inc. will be based in Cambridge, Mass., where AT&T’s new media services has been based. Industry.Net will continue to operate from Pittsburgh.

The new firm will initially employ about 600.