Our information is organized in three areas: mergers, stock offerings and venture capital. We begin each category with a close-up look at one of the biggest deals in each:

AOL's coup with TImeWarner leads mergers

It is stunning, indeed. A Virginia-based company that no one had ever heard of just a few years ago amassed enough cash by its timely popularizing of the Internet to take over one of the most powerful communications companies in the world. True, Virginia loses some luster since AOL Chairman Stephen M. Case will leave his Dulles headquarters for TimeWarner’s boxy skyscraper on the Avenue of the Americas in Midtown Manhattan. Still, AOL officials insist that Case will keep a sub-office in Dulles and, in the long run, the work force at the campus-like nerve center in Virginia will grow, not contract.

Case will have plenty to keep him busy. At the beginning of last year when the merger was announced, predictions of the new giant’s performance were rosy. The combined firms would have annual revenue increases of up to 15% and $1 billion in extra savings and revenues. The dot-bomb explosion and the quickly-slowing economy have changed the picture. Revenue growth expectations are now more like 10 percent. Stock, which in the pre-merger days for AOL had been as high as $73 per share, was selling in the high $40s in mid February.

As the heady days of the tech boom fade, there are real questions about how well a New Economy firm that made "You’ve got mail!" a national buzzword can mesh with an Old Economy stalwart built upon old-style newsmagazines and Hollywood movies. AOL itself faces some big questions. Can AOL, a company built around the modem, morph its business model to exploit new communications forms, such as wireless and broadband? AOL already is marketing a service that provides AOL through television cable. The TimeWarner side of the operation is likewise trying to reposition itself. CNN, for instance, has laid off thousands as it finds its market truncated by Web-driven news outlets and more television programs.

Even so, the new AOL will continue to pack clout for years. Other significant mergers and acquisitions for 2000 include:

• VeriSign Inc.’s purchase of Network Solutions of Herndon for $15.2 billion. The Virginia company was just one of several that California-based VeriSign acquired to beef up its Internet-based trust services, including helping clients verify payments and ensuring security for e-commerce transactions. As the demand for secure communications expands along with e-commerce, so will VeriSign’s fortunes.

webMethods Inc. of Fairfax picked up Active Software Inc. of Santa Clara, Calif., for $1.3 billion. The move enhances webMethods ability to integrate business to business electronic commerce through advanced software.

Herndon-based Network Solutions went out last year with a bang instead of a whimper. The Herndon-based company was bought in March 2000 by Mountain View, Calif.-based VeriSign, but not before the company had defied skeptics with strong earnings and a massive stock sale of nearly $2 billion that tops the list for 2000.

For nearly a decade the company’s claim to fame was its control of the Internet domain name registry, a job the National Science Foundation hired it to do in 1992. That deal, which guaranteed Network Solutions a fee for every registered name with .com, .org, .net and .edu, made its shares a safe bet during the rise of tech stocks in the mid-1990s. But in mid-1999 it lost that monopoly when the government decided to let other private-sector companies into that market. Many predicted the company would go hungry without its main meal ticket. Dozens of other companies joined in the domain business, and many figured Network Solutions’ best days were behind it.

It didn’t turn out that way, though. Late 1999 brought good news: first, the company cut

a deal with the government to let it continue to manage the domain name list for four more years. Then it landed a spot on the Nasdaq 100, and its stock—which sold for around $60 in August of that year—soared to $272 by late December.

Early 2000 brought the big event. In February, 7.7 million shares of Network Solutions stock sold at $247 a share. But most of the $1.9 billion raised went to the California-based Science Applications International Corp., which at the time owned more than 40 percent of Network Solutions. The stock sale was driven by the company’s deal with the government, which wanted SAIC — Network Solutions’ former parent company — to reduce its stake in the company. SAIC sold 6.7 million shares; Network Solutions sold a million shares and raised about a quarter billion dollars. Just a few weeks later, Network Solutions CEO Jim Rutt announced that the company had agreed to a $15.3 billion all-stock sale to VeriSign. The move puts VeriSign in the position of welcoming companies to the Web and then pitching e-commerce authentication and security solutions to them. VeriSign CEO Stratton Sclavos says the combined company will be "the trust utility that will power the Internet economy."

Part of what made Network Solutions an attractive buy was its continued strength in the domain registration market. It had registered 8.1 million domain names and still handled more than 70 percent of domain name registrations when it made the deal with VeriSign. Plus, the company was actually making a profit—with earnings in 1999 of nearly $27 million on $221 million in revenue. And despite losing sole control of the domain-name list, Network Solutions still collects a $6 annual fee per registered name no matter which company handles the registration.

Other big stock deals last year include:

When managed care emerged on the West Coast 30 years ago, it promised to revolutionize medical care. Doctors’ visits would cost a measly $10, expensive deductibles would vanish and soaring insurance premiums would return to Earth. Fast forward to today. People despise HMOs. Annual premiums are increasing by double digits, and Congress and states are considering legislation to put doctors, not accountants, back in the driver’s seat.

For an Alexandria health care startup called Lumenos, the fallout spells opportunity. Rather than rely on legislation, Lumenos believes that the magic of the market is the antidote to managed care. It wants to use the Web to put customers back in control of their health-care spending.

Formed in August 1999, Lumenos operates through a Web site that tells patients the costs of a 15-minute doctor’s visit and whether a discount is offered through a network. Company officials envision a Zagat-style guide providing information on medical procedure fees, office hours and even reviews of a doctor’s bedside manner. Patients, rather than accountants, could choose a doctor who charges $150 for a physical or the one who charges $350. "If little Timmy has the sniffles and it’s $150 and you pay, mom might wait," says Lumenos Chairman and CEO Stephen J. Shulman. "It’s letting the market place work itself out."

The philosophy holds promise for the firm that pulled off one of Virginia Business’ biggest venture capital deals last year. Lumenos raised $34 million in its first round offering last year and then another $13 million in a second round prompted by interest from Draper Fisher Jurvetson, a Redwood City, Calif. venture capital firm that wanted to get involved. Lumenos’ system eliminates the need for a primary physician’s referral, since patients could see any doctor just as in an old-fashioned indemnity plan. Plus, the company’s market studies show it would reduce insurance costs and help control premium increases.

This health-savings-account approach could save money by eliminating the need for bureaucracies created by managed care and by providing incentives for patients to make cost-conscious decisions about their medical care. While savings accounts provide incentive to avoid expenses, the program also has a safety net in case of a catastrophic injury or illness. After using the $1,500 to $2,000 the health plan provides for out-of-pocket medical expenses, employees would be responsible for the next $500 just like a deductible. Insurance would pay all remaining medical expenses. But since health insurance studies show 80 percent of employees never spend more than $1,500 annually, health savings account advocates say it will be cheaper for employee and employer alike.

While Lumenos calls itself an Internet health care company, that’s a little misleading. Don’t think of twenty-somethings working in jeans. The company’s top echelon is filled with expatriates from leading insurers such as Kaiser, Cigna, U.S. Healthcare, Aetna and Prudential HealthCare. For instance, Shulman is the former president, chairman and CEO of Prudential HealthCare and a 30-year industry veteran. Douglas Kronenberg, chief strategy officer, also has 30 years with insurers such as Prudential and Humana. "This isn’t a group of college kids with a nice idea. We’ve got quite a bit of gray hair and gray matter," says Kronenberg.

Lumenos hasn’t sold its program to any company but is in serious talks with as many as 20 large companies, including Honeywell. Much of the past 18 months have been spent developing actuary models and the company’s Web site. A test roll out of the health plan is planned in July when several companies are expected to offer the health savings accounts as options for employees. Lumenos execs will see then if their concept is as good as venture capitalists think.

Other venture capital financing deals (through the third quarter of 2000) included: