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A Year Ago: CompuServe resignations fuel merger speculation

Stephanie Lapolla ZDNet.co.uk

Published: 17 Aug 1998 06:59 BST

CompuServe Inc. today lost its second high-ranking executive in as many weeks, adding fuel to the already rampant rumors that the online service vendor has the urge to merge. Brice McNaughton, vice president and chief architect at the Columbus, Ohio, company resigned to fill a technology position at Microsoft Corp.

His departure follows that of Scott Kauffman, who hung up his hat as vice president of online services two weeks ago. Kauffman is joining a California startup called KlickOver as president and CEO.

The departing executives have helped fan rumors of a possible merger deal. After news of McNaughton's resignation, CompuServe's stock jumped six per cent in today's trading from yesterday's close of $11.88. CompuServe officials today acknowledged that active merger talks are in progress, but declined to comment on the status of those discussions.

Earlier this year, it was rumored that CompuServe was close to striking a deal with competitor America Online Inc. But H&R Block Inc., which owns 80 per cent of CompuServe, stepped in last month and rejected the bid, which was worth roughly $1 billion in stock. The McNaughton and Kauffman resignations are only the latest departures at CompuServe. In February, CEO Bob Massey retired. The position has not been filled.

"In early April we were in outside merger talks, and under those circumstances the CEO search got put on hold," said CompuServe spokesman Steve Conway. "We won't get someone to come in when there is a possibility that the company could be sold."

The McNaughton and Kauffman departures are not the result of an impending merger, Conway said.