Kmart to Auction ISP

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Kmart Corp. put up for auction its BlueLight Unlimited Internet Service, at one time the nation's third-largest Internet service provider with 7 million free subscribers.

The bankrupt mass merchandiser yesterday said United Online Inc.'s NetBrands Inc. division placed a bid. United, Westlake Village, CA, is a leading provider of free Internet access through ad-supported brands like NetZero and Juno Online.

"The original purpose of the BlueLight ISP was to bring Kmart shoppers online to shop at, which is now," said Dave Karraker, San Francisco-based director of marketing communications at Kmart and head of PR. "And now, because of Chapter 11, Kmart needs to focus on its core competencies, which is retail. So that is why we're selling the ISP, which is not a core asset for the company."

United's offer was not disclosed. Interested companies have until Oct. 4 to submit bids to U.S. Bankruptcy Court in Chicago for the Northern District of Illinois. The court holds the actual auction Oct. 7, with the winning bid declared Oct. 30.

"Because Kmart is in Chapter 11, it has to go through an auction process," Karraker said. "So, basically, the bid from United Online has enacted the auction process, which means that anyone can bid on the ISP."

Kmart on Jan. 22 filed for Chapter 11 bankruptcy protection from creditors. It was unable to compete with rival discounters Wal-Mart Stores Inc.'s prices or Target Corp.'s hip positioning. A cutback last year on advertising also kept traffic from Kmart stores.

According to a report released Sept. 16, Kmart for the 13 weeks to July 31 lost $377 million on sales of $7.52 billion, a 15.7 percent decrease in sales from the comparable second quarter in 2001. was launched in December 1999 as part of the same-named e-commerce site owned by Kmart, Troy, MI. The free Internet access service reached its peak in October 2000, with 7 million subscribers. In August 2001, Kmart started charging $8.95 a month for the service.

At last count, has 165,000 paying subscribers. The service is now among the top 15 ISPs in the United States.

Karraker said that's ISP service will continue without interruption regardless of who the final buyer is.

"BlueLight is exercising care in this process to ensure that its customer service continues and that there will be no need to change e-mail addresses," he said.

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