ASK AOL->Overture Loses AOL Contract to Google; Shares Tumble (Update4)
By Adam Steinhauer
Pasadena, California, May 1 (Bloomberg) -- Overture Services Inc. shares fell as much as 41 percent after America Online, the largest Internet-access company, replaced the Web search service with rival Google Inc. Overture said 2003 profit will fall short of estimates.
Overture charges companies to have their Web sites listed prominently in Internet search results. Without AOL, a unit of AOL Time Warner Inc. with 34.6 million Internet customers, Overture's search service will be used by fewer people.
``I'm disappointed to see AOL not re-sign'' its contract, said Paul Cook, who manages $1.5 billion in technology stocks at Munder Capital Management Inc. The firm owns Overture shares. ``They provided a really wide range of earnings guidance. I think that's troubled people a little bit.''
Overture said it will have a profit of 53 cents to 83 cents a share in 2003, less than the 88-cent average estimate of analysts polled by Thomson Financial/First Call. Second-quarter profit will be 23 cents, lower than the 25-cent analyst estimate, Overture said.
Shares of Pasadena, California-based Overture, formerly known as GoTo.com Inc., fell $13.18 to $21.01 in early afternoon trading. Earlier, they fell as low as $20.26. The stock had fallen 3.5 percent this year.
AOL isn't the first to drop Overture this year. EarthLink Inc., the third-largest U.S. Internet service provider, switched to closely held Google in January. Overture said at the time the loss of EarthLink wouldn't have a material affect on its financial results.
Google
Overture provided search services to AOL in the U.S. Analysts said the two companies had been negotiating a longer-term agreement. AOL granted a one-month extension in March.
Google's paid listings will begin appearing on Dulles, Virginia-based America Online's services, including Netscape and CompuServe, immediately, the companies said. Financial terms of the agreement weren't disclosed.
AOL shares fell 39 cents to $18.63.
Google was founded by two Stanford University students who developed a technology that evaluates the relevance of Web pages to perform searches on the Internet.
On Friday, Yahoo! Inc., owner of the most-used group of Internet sites, extended its use of Overture's service for three years.
In August 2000, America Online agreed to display Overture's listings on the search results page of AOL, AOL.com and Netscape's Netcenter, Overture said in a 10-K filing with U.S. Securities and Exchange Commission. The 19-month contract called for a guaranteed payment by Overture of $50 million, the filing said. |
