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Infrastructure

Internet-Access Provider to Schools Getting Out of Education Business

By Mark Walsh — November 01, 2000 2 min read

It looks like ZapMe! Corp. is on its way to zapping itself out of school classrooms.

The San Ramon, Calif.-based company, which since 1997 has provided advertising- supported computers and online connections to schools, is likely to be acquired by one of its business partners, an Israeli satellite firm with no interest in the education market.

Gilat Satellite Networks Ltd. offered this month to acquire 51 percent of ZapMe!'s 44.3 million outstanding shares of stock for $2.32 a share, or about $50 million. ZapMe!'s board has recommended that its shareholders sell.

Gilat’s Spacenet Inc. subsidiary has been used by ZapMe! to provide its Internet service to some 1,600 U.S. schools where it has also installed free computer labs. Gilat is interested in some of ZapMe!'s Web- browser technology for developing so-called vertical communications networks for businesses and their suppliers in such businesses as food services, auto repair, and pharmacies.

ZapMe! executives could not be reached for comment, but they have announced that the company will stop installing new computer labs in schools and is “exploring alternatives, including divestiture, for its educational network.”

The company said schools that are currently receiving Internet service will continue to do so, but it wasn’t clear for how long.

Customer Complaints

In an Oct. 24 filing with the federal Securities and Exchange Commission concerning the Gilat offer, ZapMe! cited the opposition it has faced from those seeking to eliminate advertising in schools. It also said it was spending $20 million per quarter to deploy and maintain the computer network in schools.

“Given the continued losses and declining stock price, the company was not certain of its ability to obtain adequate lease financing for its school deployment plans,” ZapMe! said in the filing.

The company’s stock closed at $2.062 a share on Oct. 26.

ZapMe! attracted criticism from groups concerned about commercialism in schools, not just for putting advertising on classroom computer screens, but also for collecting aggregate personal data on children in its participating schools. (“Web Sites Worry Privacy Watchdogs,” June 21, 2000.)

In addition, some educators complained about poor service and unreliable Internet connections from the company. (“Some Schools Feel Burned by ZapMe! Offer,” March 15, 2000.)

Among ZapMe!'s investors are Dell Computers and Sylvan Ventures, the venture capital arm of Sylvan Learning Systems Inc.

Funding for the business page is provided in part by the Ford Foundation, which helps underwrite coverage of the changing definition of public schools.

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