Mail-order dealer Micro Warehouse has spent $14.5 million on acquiring Online Interactive, despite huge losses made by the electronic software reseller.
The investment will not pay off until at least next year, because Micro Warehouse has admitted that its purchase will continue to make a loss in the second half of 1997, adversely affecting the dealer?s results.
Online Interactive lost $2.6 million on sales of $3.2 million in its year to 30 June 1997.
The buy is the first major deal struck by former Ingram Micro supremo Chip Lacy since joining Micro Warehouse as chief executive. He said: ?This acquisition reflects our belief in the strategic importance of the internet to our business.?
Lacy told PC Dealer that Micro Warehouse has plans to introduce Online Interactive?s electronic software model into Europe. ?We will take the model into Europe by the end of the year, spreading it incrementally and starting with the countries that have a well-developed internet.?
He admitted Online?s balance sheet looked bad, but the company is not concerned. ?All internet startups have profitability issues, and it takes a while,? he said. ?Now we can leap ahead in online business?
Online Interactive and its staff will become a division of the mail-order giant, remaining in the Seattle area under CEO John Ballentine. Micro Warehouse hopes some of its 2.3 million customers will use the division if they decide to buy online.
Ballentine founded Online Interactive in 1994.
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