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Hollywood Entertainment Stock Jumps

July 31, 1998

WILSONVILLE, Ore. (AP) _ Stock in Hollywood Entertainment Co., the nation’s second-largest video chain, jumped 11 percent Friday on the company’s planned acquisition of online video retailer Reel.com.

Analysts said the $100 million cash-and-stock purchase gives Hollywood Entertainment an edge in online video sales over Blockbuster Entertainment Corp., the nation’s top video chain.

``This opens a lot of avenues for Hollywood that are probably hard to even imagine right now,″ said Rosemary Sisson of NationsBanc Montgomery Securities in New York. ``Blockbuster isn’t doing this. This industry is moving so fast _ you need to get in there and get the customers.″

The deal was announced Thursday after stock markets closed. On Friday, Hollywood Entertainment stock rose $1.68 3/4 to close at $17.68 3/4 on the Nasdaq Stock Market.

Reel.com’s Web site gets about 200,000 visitors a day, and about 2 percent of those make an online purchase, said Mark Wattles, chairman and founder of Hollywood Entertainment.

Some analysts said Hollywood’s $100 million valuation for the not-yet-profitable Reel.com may be a bit steep. But Julie Pickar of Zona Research Inc. in Redwood City, Calif. said it may have been smart timing to make the acquisition ``before the online store becomes too big to buy.″

In addition to the deal, a group of high-profile Reel.com investors _ including Intel Corp., Paul Allen’s Vulcan Ventures Inc. and former Blockbuster vice chairman Scott Beck _ acquired an additional 5 million shares of Hollywood Entertainment.

Hollywood Entertainment has more than 1,000 stores, with 25 million members.

The company also reported Thursday that its second-quarter profits rose 3 percent to $5.65 million, while revenue soared 51 percent to $166.73 million.

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