Berkeley Systems Inc.'s dream of going public has ended in acquisition. The wacky creator of the irreverent trivia game You Don't Know Jack and the popular After Dark screensavers has been snapped up by a mega-merchandiser of travel and cars - and a little software.
CUC International, which told Wired News on Tuesday that it had acquired Berkeley but has not yet announced the deal, saw US$1.94 billion in revenues in 1996 from its core business in shopping clubs. CUC charges dues to members who participate in its discount merchandising programs like Travelers Advantage and Net Market.
Since only last year, the company has begun to show an interest in selling content. It acquired educational and entertainment software companies Davidson & Associates Inc. and Sierra On-Line Inc. for approximately $2.2 billion combined in February 1996.
"The acquisition of Berkeley, which has an excellent brand, makes for a very interesting combination in this space," said Clark Spurrier, vice president of investment banking at JP Morgan. "It's a good overlap with the other two edutainment and game makers and would give CUC an online strategy which it doesn't yet have." Berkeley Systems runs a free Web-based game site, which recently logged its 500,000th player.
But other analysts were baffled by the deal, pointing out that during a recent money-raising road show, CUC told investors it would not be buying more software companies. Last year's acquisitions represent riskier business than CUC's traditional revenue streams from the shopping clubs it operates.
How the corporate acquisition will affect the nutty humor of Berkeley Systems - whose Web site brags "We don't wear suits, (but we know a few)" - is difficult to predict. Rumors of layoffs and changes to the executive lineup are rampant among employees, although Berkeley spokeswoman DeEtte Christie would not comment.
At CUC, the deal was downplayed. "Berkeley Systems is a great company, but it's just a small fold-in company. It's a very small acquisition for us," said Laura Hamilton, vice president of investor relations at CUC, which is itself an investor in Wired Ventures.
Analysts who are withholding in-depth opinions on the deal until financial details are disclosed have nevertheless said that Berkeley's well-known interest in going public had been thwarted by a market wary of investments in game software and CD-ROMs. There is a trend toward consolidation in the industry, says Spurrier, and "you should expect to see a lot more [acquisitions like] Berkeley's in the next six months."
