After posting revenue losses of $13 million for 1999, Internet company Eisa is a prime target for acquisition, but not by Telstra, says analyst Paul Budde.
In an ASX announcement last week, the Internet company attributed revenue losses for the year ended December 31 to "lower sales volumes than originally forecast". The statement also said that the company would terminate its involvement with all PC and Net access bundled packages as a result of the losses.
However, Budde said the revenue losses would not undermine the company's position as a market leader. Additionally, Eisa would remain an attractive acquisition target for ISPs.
"The consolidation of the Internet service provider market is taking place at the top rather than the bottom. So there is plenty of scope for the others to merge and take over. Over the next year we'll see half a dozen of these moves in the Australian market, of which Eisa will be one," Budde said.
He said it was more likely Eisa would form a partnership with Murdoch-owned News Limited than with Telstra. "It's the content Eisa really wants, not the access."
An ideal business model would have News providing media content and Eisa "taking over excess activities in the engineering department", he said.
Budde predicted that Telstra would be reluctant to make a bid for Eisa. The telco giant would be discouraged by its current difficulties in attempting to acquire OzEmail, he said.
"They [Telstra] have already been rebuffed by the ACCC [Australian Competition and Consumer Commission], so I'm pretty sure they've got enough on their plate right now. If they made moves to buy Eisa, they would really have problems."
Telstra submitted its official bid for the acquisition of OzEmail to the ACCC last week, but the ACCC would not divulge any of the details.
Telstra declined to comment on Eisa's financial results.