MSN Shopping Gives Egghead.com Top Billing

The roller-coaster ride that Egghead.com’s (Nasdaq: EGGS) stock price has seen in the last year may be on the upswing again, thanks to a deal announced Tuesday with Microsoft and MSN. Under the new agreement, Microsoft’s MSN Shopping site will feature Egghead as its primary merchant for computer software, and Egghead will also have an advertising presence on a variety of MSN sites, including MSNBC.

The deal should continue to solidify Egghead’s position as one of the top retailers on the Internet. Egghead.com also has similar deals with the top three sites on the Web (AOL, Yahoo! and Geocities), as well as partnerships with the @Home Network, Doubleclick, CNET, Netscape and ZDNet.

In fact, Egghead is one of the most interesting e-commerce companies because of its bold decision last year to close its 80 remaining retail stores and move its entire business to the Internet.

Egghead’s online store now carries more than 40,000 products, including 4,000 software titles that can be purchased and downloaded. The site also sells hardware and includes an auction service.

Under the new deal, Egghead will become the primary software merchant on MSN.com, and also be featured on MSN Shopping, with advertising on MSN Computing Central, MSN Gaming Zone, travel site MSN Expedia, MSN CarPoint, and MSNBC.com, the most popular news site on the Internet according to Web monitoring firm, Media Metrix. Financial terms were not disclosed.

Stock Impact

Egghead.com’s stock jumped more than 9 percent on the news on Tuesday, closing up 1-9/16, at 18-7/8. That’s still a long way from its 52-week high of 40-1/4, but it’s also up more than 400 percent from the 52-week low of 4-5/16.

From the Mall to the Web

A year ago, on January 29, 1998, Egghead, which was then known for its stores in shopping malls and strip malls, announced that it was closing down all its retail outlets, laying off about 800 of its 1,000 employees, and changing its name to Egghead.com. The company also shut down its Sacramento distribution center and took a $42 million fourth-quarter charge.

The moves were partially based on the company’s continuing losses. The stock fell 1-3/8, closing at 6-3/8 on the day of that announcement. But once Egghead.com positioned itself as an Internet stock, the share price began to climb. Though the stock price has pulled back significantly in the last two months, as the Internet stock frenzy has begun to abate, this deal with Microsoft seems to have convinced some investors that the stock is a solid investment.

“The Microsoft agreement is important,” Egghead spokesman Jon Brodeur said. “For 15 years the Egghead brand has been synonymous with selling software. Software is one of the most popular products sold over the Internet today. We look forward to further increases in our market penetration as a result of this agreement with MSN.” The company’s market share could increase further if Microsoft decides to link to Egghead.com from the ‘Products’ page on Microsoft.com. That would be a logical move and a win-win situation, but it remains to be seen if it will happen.