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CNET News.com: Gateway, eSoft resolve funding spat

Sep 06, 2000, 22:05 (0 Talkback[s])
(Other stories by Stephen Shankland)

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"Gateway and eSoft have resolved a disagreement, triggered by eSoft's slumping stock price, about a Gateway investment in the small Linux hardware and software company. The news yesterday sent eSoft's stock up 13 percent to close at $8.53, but shares sank 5 percent to $8.13 in midday trading today. The stock has been steadily dropping since November, when excitement about the Linux operating system carried its stock to a high of $42.87."

"In February, when eSoft's stock was generally trading between $20 and $30, Gateway announced a plan to invest $25 million in eSoft, buying about 1.3 million shares at $19.51 apiece in two installments. Gateway made the first $12.5 million payment when the deal closed April 26 but didn't make the second payment within 90 days of the closing date, eSoft said in a Securities and Exchange Commission filing."

"Negotiations have resulted in a revised agreement, the companies said. In it, Gateway will provide the $12.5 million as a four-year loan convertible to eSoft stock. In addition, eSoft will purchase 30,000 shares of Gateway stock for $3 million, and the companies agreed to expand their sales, marketing and distribution agreement."

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