Updated from 10:14 a.m. EST
Steel and mortar meet the Internet.
U.S. Steel, a unit of
, said Thursday it would take a small stake in a company that markets steel over the Internet, in a move that could be aimed at stemming a decline in profits and boosting its ailing stock.
The largest U.S. steel producer will buy a minority stake in
, a two-year-old online business-to-business trading place for the steel industry.
Shares of USX were 1/4 higher, or 1%, to 23 5/16 in early trading. USX closed down 9/16, or 2.4%, to 22 1/2.
A company spokesman, John Armstrong, would not comment on speculation that the investment is a reaction to falling profits and share price. Representatives from e-STEEL were not immediately available for comment.
"I do believe that steel companies will need to address the issue of e-commerce going forward," said Todd Hinrichs, an analyst at ABN AMRO who rates USX a buy. The firm has done no underwriting for USX. "I would tend to believe that they are placing themselves where they need to be in the future."
U.S. Steel President Paul Wilhelm said in a statement that he believes e-commerce will provide real value to U.S. Steel and its customers and offer more efficient ways of buying and selling steel products.
A month ago, the steelmaker, based in Pittsburgh, reported that profits had fallen 34% in the fourth quarter as a flood of cheaper imported steel cut into revenue. Shares of USX, it parent company, have fallen more than 30% this year.
Asked whether U.S. Steel is putting itself into a more competitive pricing environment with its e-STEEL venture, Hinrichs said, "It may be a factor, but I would not overestimate that factor. I view them as creating a more efficient marketplace. I think they're taking an active role in developing e-STEEL."
Though it may be a knee-jerk reaction for U.S. Steel, the deal is a coup for the young Internet company backed by Goldman Sachs and Vulcan Ventures. e-STEEL provides a Web site where steel buyers and sellers can negotiate prices in real time.
"This agreement with U. S. Steel, a company recognized worldwide for quality, performance and technology leadership, is a significant validation of the e-STEEL vision,'' e-STEEL Chairman and Chief Executive Michael Levin said in a statement. "Today marks an important turning point in steel e-commerce.''
e-STEEL has also entered into agreements with USX Engineers and Consultants, a wholly owned subsidiary of USX.