Monday, January 14, 2002

Judge Approves Sale of netLibrary's e-books to Nonprofit Library Group By JEFFREY R. YOUNG A federal bankruptcy judge on Friday approved the sale of netLibrary's 40,000 e-books and other assets to OCLC, a nonprofit library organization. The sale, which is subject to a 10-day appeal period, would largely leave netLibrary's e-book operations intact as a subsidiary of OCLC. netLibrary, a three-year-old e-book provider based in Boulder, Colo., filed for Chapter 11 bankruptcy protection in November after failing to win enough financing to stay afloat. OCLC, which is based in Dublin, Ohio, and provides computer cataloging and other services to 40,000 libraries worldwide, quickly offered to purchase the operation. So far, netLibrary has been able to maintain service to its thousands of library customers, and under the terms of the deal it would get a loan of up to $2.4-million from OCLC during the transition. The final price tag for the e-book provider, which the judge will set, is expected to total $9-million to $10-million. OCLC officials said they intend to retain all of netLibrary's 125 employees, who will continue to work at their current offices in Boulder. Robert W. Kaufman, netLibrary's chief executive officer, will continue to lead the e-book operations. How does OCLC plan to succeed where netLibrary failed? "We think they were very close in many respects to a working [business] model," said Jay Jordan, president and CEO of OCLC. He said he hopes that his group's "deep understanding of libraries" and its financial stability will make the e-book service work. And Mr. Jordan added that OCLC hopes only to break even with sales of e-books, rather than make a profit. For now, the cost to libraries for the service will remain roughly the same, he said. No one other than OCLC attempted to purchase the e-book company, said Marge Gammon, senior director of marketing for netLibrary. "We are all excited and pleased and anxious to move this forward," she added. A pending lawsuit against netLibrary is not expected to interfere with the sale, according to an OCLC official who spoke on condition of anonymity. In November, Parthenon Investors LP, which had made two separate $7.5-million investments in the company, sued netLibrary and Mr. Kaufman, its CEO, in U.S. District Court in Denver. The suit charges that netLibrary, after winning the initial sum, fudged its financing to meet the investors' criteria for the second $7.5-million infusion. In its lawsuit, Parthenon accuses netLibrary of falsely overreporting its revenues by at least $1.5-million so that it could meet a revenue target that would guarantee further financing from the venture-capital firm. netLibrary officials refused to comment on the lawsuit. Background articles from The Chronicle: netLibrary Files for Bankruptcy Protection (11/30/2001 ) A Company That Offers an Online Library Lays Off Half Its Employees (11/29/2001) Easy-to-print version E-mail this article

State spending on higher education grows by smallest rate in 5 years College lobbyists protest move to keep them off panels revising student-aid regulations NCAA president warns of "trust gaps" facing college athletics Athletic association rebuffs union seeking to work with college athletes U.S. Supreme Court agrees to hear case on whether private colleges may be sued for violating student-privacy law Colleges are recruiting closer to home but maintaining enrollment goals, survey finds Emirates Airlines will not renew pilot-training contract with Western Michigan U. Southern U. System board fires chancellor of New Orleans campus Years of genetic research lost in fire at U. of California at Santa Cruz Kaplan buys Achieva and 3 vocational colleges  Law intended to modernize Spain's university system runs into criticism Judge approves sale of netLibrary's e-books to nonprofit library group SCT to buy Sallie Mae's software arm Colleges, fighting U.S. trade proposal, say it favors for-profit distance education