March 19, 1997 11:00 AM ET
Analysts see IBM/NetObjects deal as plug for hole in Lotus lineup
By Margaret Kane

  IBM's purchase today of a majority stake in NetObjects Inc. will give the start-up a strong backer to replace the group of investment partners that had previously funded the company, according to industry executives and analysts.

NetObjects, the developer of a popular Web site creation tool, has so far gone through two rounds of venture capital financing, first receiving $5.4 million in February of last year and two months ago securing another $4.5 million.

In announcing its purchase of a majority stake in NetObjects, IBM did not disclose the size of its stake. IBM officials said the original investors, along with NetObjects' management team and employees, will retain investment interests.

Analysts said enhancing Notes and Domino with NetObjects' Fusion Web development platform is a strategic move.

"This is a big win for IBM and Lotus because it fills a big hole for Notes and Domino -- a graphical development environment," said Bruce Smith, an Internet analyst with Merill Lynch, in New York City. "Notes is a good rapid application development environment, but not as graphical as it could be."

Current investors in NetObjects include Perseus LLC, AT&T; Ventures, Norwest Ventures, Venrock Partners and private investors.

IBM said the purchase of a stake in NetObjects, creator of Fusion, would "ensure that there are superb Web site creation tools, in addition to our own, that can fully exploit the extensive capabilities of the Lotus Domino Web server, as well as other IBM products such as DB2 and VisualAge."

NetObjects is headed by Chairman and CEO Samir Arora. The company will continue to operate as an independent company. Michael Zisman, executive vice president at Lotus, will join NetObjects' Board of Directors and will represent IBM's interests.

Zisman joins former Apple Computer Inc. CEO John Sculley, who became a member of NetObjects' board in January. Sculley is a partner in Perseus LLC, a Washington-based merchant bank that is an investor in NetObjects.

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