Information Technology Reference
In-Depth Information
more than 1.5 million subscribers were in Europe. But the market was quickly growing
beyond programmers and hardware buffs, and competition rose up.
In 1997, H&R Block announced its intention to sell off CompuServe. The up-and com-
ing America Online, the most logical buyer, made several offers to purchase CompuServe
using AOL stock, but Block management sought cash. Early in 1998, John W. Sidgmore,
vice-chairman of WorldCom and former CEO of UUNET, contrived a complicated, el-
egant transaction which met the needs and capabilities of all parties, while also playing
out to WorldCom's advantage. WorldCom acquired all the shares of CompuServe using
$1.2 billion of WorldCom stock. As previously arranged, Block nearly immediately sold
the WorldCom stock to other investors for $1.2 billion in cash. Also as previously ar-
ranged, within one day of this deal, WorldCom sold the Information Service portion of
CompuServe to AOL, retaining for itself the CompuServe Network Services portion. At
the same time, AOL sold its networking division, Advanced Network Services (ANS), to
WorldCom. Business analysts praised the deal as a beautiful construct: AOL was doing
information services; WorldCom was doing networks; Block had been properly recom-
pensed; and all felt as if they'd driven a profitable bargain.
Now CompuServe Network Services was combined with ANS and an existing
WorldCom networking enterprise called Gridnet to form WorldCom Advanced Networks.
(Meanwhile CompuServe remained a discrete brand under the AOL umbrella.) One year
after the CompuServe deal, WorldCom acquired MCI and became MCI WorldCom;
WorldCom Advanced Networks in turn became MCI WorldCom Advanced Networks and
- after a failed bid by WorldCom to acquire Sprint - was rolled into UUNET. After a much-
publicized bankruptcy, WorldCom emerged as MCI which, in 2006, was sold to Verizon.
The buyer of CompuServe Information Services, AOL, had been founded by Steve
Case and Jim Kimsey as Quantum Computer Services in 1985. The concept behind
Quantum was to provide online services (QuantumLink, or Q-Link for short) for users
of the then-popular and highly-economical Commodore computers. "The idea was that
someday people would want to be able to interact and get stock quotes and talk with other
people or all these different things," Case has recalled. "I just believed that was going to
happen." Elsewhere he has said: "If you're doing something new you've got to have a vis-
ion. You've got to have a perspective. You've got to have some north star you're aiming for,
and you just believe somehow you'll get there, which kind of gets to the passion point."
In 1987, with the Commodore installed base declining in comparison to the growth of
the Apple II and Macintosh machines, Case and Kimsey opened up their service to be com-
patible with Apple operating systems. Following this innovation, Quantum grew quickly
and was soon providing online services and related software for other companies, includ-
ing Tandy Corporation and IBM.
Quantum's costs were high, and it quickly ran through its capital. The proprietors
rebranded Quantum as
America Online
(AOL) in 1989, and reorganized with Case taking
