FYI, an opinion on ALTA (I do not necessarily agree with it)...
IPO OUTLOOK: AltaVista is solid product, but bad investment
RELATED SYMBOLS: (YHOO)(ASKJ)(CPQ)(MMXI)(MSFT)(JPTR)(AOL)(CMGI)
By Scott Reeves, Bridge News New York--Mar 24--AltaVista may be the Flying
Dutchman of the new issues market. In the maritime legend, the Flying Dutchman
was ghost ship doomed to sail the seas forever and seamen believed its
appearance signaled imminent disaster. AltaVista, despite the range of its
content and powerful search capabilities, has bounced from Digital Equipment
Corp. to Compaq Computer Corp. (CPQ) to CMGI Inc.(CMGI) and now, out of the
mist, it heaves -- more than a little late -- into the IPO market. The planned
offering, helped by Morgan Stanley Dean Witter's clout, will show some life in
early trading. But AltaVista lags far behind industry leader Yahoo (YHOO),
omnipresent America Online (AOL), heavy-hitter Lycos (LCOS) and Infoseek, now
part of Walt Disney (DIS). This makes AltaVista's long-term prospects uncertain.
Without the backing of a major company like Time Warner or CBS, AltaVista
probably will have difficulty securing top-notch content and attracting new
users in the future. Without steady growth, AltaVista's advertising and
e-commerce will lag. Worse, the battle to establish Web portals appears to be
about over. Advertisers and users are comfortable with competitors and AltaVista
may be too far behind to catch up -- especially because it offers nothing new or
special to entice anyone away from its rivals. In short, AltaVista simply may
lack the sail to effectively challenge its sleek competitors. Lisa Allen, an
analyst at Forrester Research in Cambridge, Mass., noted that CMGI walked away
from its "core competency" when it picked up AltaVista. "CMGI has made a name by
turning start-ups like Lycos and reel.com into household names -- by growing
small Web companies into mature businesses," Allen said in a report. "Now, CMGI
is saddled with an established operating business in need of a turnaround. While
the deal may let CMGI pass financial muster as a holding company, its vision of
a 'mega portal' anchored by AltaVista won't be helped by CMGI's properties,
including ragingbull.com and furniture.com, that lack the 'oomph' of an espn.com
and disney.com boosting The Go Network."
Figures from Media Metrix, the Internet eyeball counter, show that AltaVista was
the 13th most visited Web site in February with 12.3 million unduplicated
visitors. America Online is top of the heap with 57.6 million visitors and is
followed by Yahoo (#2) with 45.5 million; Lycos (#4), 31.6 million; Excite At
Home (#5), 30.2 million and Go Network (#6), 21.3 million. Ask Jeeves (#15)
ranks two notches below AltaVista with 11.2 million visitors.
GATEWAY TO THE INTERNET AltaVista is an Internet search, new media and
e-commerce network designed to deliver personalized information and services to
users worl dwide. The company seeks to become a single Internet destination for
search, information, communications and e-commerce.
The potential market is huge. International Data Corp. estimates that the number
of Internet users will grow to about 502 million by the end of 2003 from 142
million in 1998, a compound annual growth rate of about 29 percent. Internet
advertising revenues in the U.S. are expected to increase to $11.5 billion by
2003 from $2.1 billion in 1998, Jupiter Communications reports. Consumer
purchases via the Internet in the U.S. are expected to increase to about $184
billion in 2004 from $20 billion in 1999, according to Forrester Research.
COMPANY HISTORY
AltaVista first operated as a unit of Digital Equipment Corp. Compaq Computer
acquired Digital in June 1998 and in January 1999, AltaVista began operating as
a separate business unit within Compaq.
Compaq then began a string of acquisitions to extend AltaVista's reach. In Feb
1999, it acquired Shopping.com, an e-commerce company, and in April 1999, it
acquired Zip2, a local portal service.
In August 1999, Web holding company CMGI acquired about 81.5 percent of
AltaVista's stock and Compaq retained the remaining 18.5 percent. AltaVista
received Shopping.com and Zip2 as part of the acquisition. In October 1999,
AltaVista acquired iAtlas' filtering technology from CMGI.
In Feb 2000, AltaVista acquired Raging Bull, a provider of financial information
and an affiliate of CMGI. In Feb 2000, it also picked up Transium Corp., a
provide of scalable hosted search services designed to make content
manageableand searchable and provide fast search results.
THE PLANNED OFFER
AltaVista Co. of Palo Alto, Calif. plans to offer 14.8 million shares, including
2.96 million set aside for international investors, at $18 to $20 each through
underwriters led by Morgan Stanley Dean Witter. The proposed Nasdaq symbol is
ALTA.
There will be about 154 million shares outstanding after the IPO. CMGI will hold
about 73.8 percent of AltaVista's stock upon completion of the offering.
Net proceeds raised in the IPO will be used for working capital, sales and
marketing, general corporate purposes and possible acquisitions.
For the three months ended Jan 31, 2000, AltaVista reported a net loss of $270.6
million on revenues of $50.1 million. For the year ended Dec 31, 1998, the
company reported a loss of $949.1 million on revenues of $45.3 million.
Competitors include America Online, CNet, Direct Hit, Excite, Go Network,
Google, HotBot, Inktomi, Lycos, Microsoft Network, Northern Light and Yahoo.
NOT A BUY AND HOLD
AltaVista faces daunting competition and its long-term prospects are uncertain.
Both Yahoo and Lycos have a bigger market share than AltaVista and have become
seasoned, top performing stocks. For many investors, there may simply be no
room, or need, to add AltaVista to their portfolio.
There will be some early pop in the deal, but the stock soon will drift
aimlessly like the Flying Dutchman. It's probably wise to get in and out of
AltaVista's IPO quickly. End
[slug: WEEKLY-IPO-OUTLOOK] [symbols:US;ALTAQ:US;ALTA]
The Bridge ID for this story is 07869
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