The Wall Street Journal Interactive Edition -- April 18, 2000
Tech IPO
AltaVista's IPO Postponement
Creates More Fear for Investors
By WILLIAM M. BULKELEY
Staff Reporter of THE WALL STREET JOURNAL
AltaVista to investors: Hasta la vista.
The move by Internet search site AltaVista Co. to postpone its planned initial public offering, one of
the most closely watched IPOs of the year, generated more fear in already-spooked technology
investors. The company, which is owned by Internet investment firm CMGI Inc., didn't say when,
or if, it would try again.
Altavista's IPO was originally scheduled to price Monday. Investors had watched the planned IPO
closely because AltaVista is one of the oldest and best-known names of cyberspace.
The latest move caps a long and somewhat tortured IPO history for AltaVista. The search engine
first filed for an IPO in 1996. That offering was called off the following year, mainly because of
market conditions. Three years and two owners later, the IPO plan coincided almost exactly with a
sharp drop in investor confidence about business-to-consumer Internet outfits. Then came last
week's stockmarket turmoil, in which shares of most technology companies were pounded.
The postponed IPO is a headache for CMGI, the search engine's current owner, which paid about
$2.3 billion for most of AltaVista last year to then-owner Compaq Computer Corp. CMGI almost
immediately laid out plans to spin off part of Altavista. In the past few months, CMGI's shares are
down about 60%, partly on a less-positive IPO climate.
According to AltaVista's most-recent S-1 filing with the Securities and Exchange Commission, the
company planned to offer 14.8 million shares at between $18 and $20 each, raising more than
$250 million. A spokesman declined to say whether its underwriters, led by Morgan Stanley Dean
Witter, had suggested a lower price. An AltaVista spokesman said the decision to postpone the
offering reflected "market conditions -- not operational issues."
However, the markets may be increasingly bothered by operational issues.
Despite millions of dollars of advertising spending by CMGI in the past six months, AltaVista hasn't
appreciably increased its audience, a key metric for Internet sites. In February, AltaVista slipped to
the No. 13 spot among all Web sites, from No. 9 in January, according to MediaMetrix. The
various AltaVista sites drew about 12.3 million viewers in February, down about 8% from the
previous month. The company now ranks eighth among portal Web sites, according to Nielsen/Net
Ratings.
Like most Internet sites serving individuals, AltaVista has been racking up huge losses on small
revenue. In its fiscal fourth quarter ended Jan. 31, 2000, it reported a loss of $272.2 million on
revenue of $50.9 million. Of the loss, $222 million came from amortization of intangibles from
acquisitions, and didn't reflect cash payouts.
One key to AltaVista's business is an agreement between its 80% owner CMGI, North Andover,
Mass., and its 18% owner Compaq, which programs certain keys on some of its consumer
computers to connect directly to CMGI-owned sites, including AltaVista. That agreement requires
that AltaVista be among MediaMetrix's top 12 sites for any four-month period. In recent months,
its rating fell to 13 from nine, but a spokesman said other ratings show it rising. AltaVista started a
$120 million marketing campaign last October to boost use.
AltaVista was developed by Digital Equipment Corp. engineers in 1995 to show off the power of
the company's computers. In 1996 it was the most-used search engine, and Digital announced
plans to spin it out as a public company. However, a weak market and disagreements between the
head of the unit and Digital's president led to postponement.
After Compaq bought Digital in 1998, it received offers for the site from numerous competitors, but
decided to beef it up instead, with an eye toward an eventual public sale. Then last June, CMGI
bought an 83% stake in AltaVista for $2.3 billion.
Once considered the most comprehensive of the search engines, it has lost cachet among some
users. According to a recent "search engine showdown" on Web site Notess.com
(www.notess.com), Fast and Northern Light both search a larger database than AltaVista.
AltaVista said the study's methodology "underreports" its searches.
AltaVista wasn't alone among postponements of offerings. Miami-based Yupi.com
(www.yupi.com), which aims its Internet operations at Spanish speakers, delayed its planned
offering because of market conditions. |
