September 18, 2002, 12:00 AM

Kmart wants to exit the ISP business

Focused on turning around its ailing stores, a bankrupt Kmart seeks a buyer for its ISP--once the keystone of the retailer`s web strategy.

Kmart Corp. wants out of the ISP business, it said in documents filed this week in U.S. Bankruptcy Court, Northern Illinois district. Kmart is putting its BlueLight ISP up for sale. Profitless since the end of 2000, Kmart filed Chapter 11 bankruptcy in January and reported a second quarter loss of some $377 million earlier this week.

“Kmart needs to concentrate on the core competencies of the business and the core competencies of a retailer do not include an ISP,” says a Kmart spokesman.

Kmart says it’s found a prospective buyer in NetBrands Inc., a subsidiary of United Online Inc., an operator of other ISPs including Juno. However, the sale is an auction that gives other interested buyers a chance to submit bids until Oct. 4, says the spokesman. The auction will be held Oct. 7, and the results then go to bankruptcy court for approval Oct. 30. Kmart isn’t disclosing whether there are other bidders.


Kmart has about 165,000 subscribers to its BlueLight ISP, who pay $8.95 per month. If NetBrands wins the auction, Kmart says it will work with it to ensure there is no interruption of service or changing of e-mail addresses for subscribers. The company says it will not speculate on what will happen if another company were to win the auction.

Kmart’s BlueLight ISP had been launched as a free service with the intention of bringing more Kmart customers onto the Internet. At one time it had as many as 7 million subscribers listed with about 1 million of them active, BlueLight CEO Richard Blunck told Internet Retailer in August. However, the ISP was losing money, bottoming out at a drain of $3 million to $4 million per month prior to Blunck’s arrival as CEO in May 2001.

A switch to a paid model, one of several measures instituted by Blunck to shore up Kmart’s overspent subsidiary, drastically reduced the subscriber list but returned the ISP to profitability last November, according to Blunck. But the company will now focus all its efforts on its stores and web site. “An ISP doesn’t figure into the strategy at this time based on what the company needs to do to emerge from bankruptcy as quickly as possible,” says the spokesman.


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