Overture to buy AltaVista for $140 mln
By Lisa Baertlein
PALO ALTO, Calif., Feb 18 (Reuters) - Internet search company Overture Services Inc. <OVER.O> on Tuesday said it would buy Web portal AltaVista from CMGI Inc. <CMGI.O> in a $140 million deal aimed at boosting its own "competitive advantages".
Overture, which gives advertisers a way to bid for well-placed spots among Web search results distributed to partners like Yahoo Inc. <YHOO.O> and Microsoft Corp.'s
MSFT.O> MSN, agreed to pay AltaVista with common stock currently worth $80 million plus $60 million in cash. It also said it would assume some of AltaVista's liabilities.
AltaVista's selling price is a far cry from the last one fetched by company, which is best known for being one of the first to offer an easy way to search the Web.
In 1999, now-struggling CMGI paid Compaq Computer Corp. $2.3 billion for an 83 percent stake in Palo Alto, California-based AltaVista. Compaq has since merged with Hewlett-Packard Co. <HPQ.N>
Overture shares shed 8 percent of their value on the after-hours news, falling to $20.90 from their Nasdaq close of $22.79. Shares of CMGI, formerly a high-flying Internet holding company, jumped nearly 22 percent to $1.01 after finishing the regular Nasdaq session at 83 cents.
U.S. Bancorp Piper Jaffray analyst Safa Rashtchy said AltaVista has solid core technology and plenty of patents, but hasn't done a great job lately of translating those assets into products.
"There's a chance for Overture to rejuvenate that potential," Rashtchy told Reuters.
The acquisition, which is slated to close in April, is expected to be "dilutive in the near term," Overture Chief Financial Officer Todd Tappin said during a conference call with analysts.
Tappin declined to update Overture's guidance, saying the Pasadena, California, company was still working out integration plans and future strategies.
Nevertheless, Overture said it sees the purchase adding to earnings by mid-2004.
COMPETITIVE QUESTIONS
Competitive questions have been front and center in analysts' minds since Yahoo announced late last month that it had hired Overture's vice president of search to do the same job in its search unit.
Although both companies have said their relationship remains strong, some analysts have speculated that Yahoo might be exploring the creation of its own internal paid-search products.
"We were not motivated to act by other external factors," Overture President and Chief Executive Ted Meisel said during the company conference call.
"We do not believe we are creating a competitor for our partners," he added.
Meisel said the tie-up would help Overture strengthen its offerings, allow the company to syndicate AltaVista's advanced algorithmic search technology that scours the Web for answers to users' queries, and give Overture a place to test new products and services before rolling them out to partners.
MSN declined comment through a spokeswoman. Representatives from Yahoo were not immediately available for comment.
Rashtchy said Overture's move "chips away a little bit" at the company's assertion that it's not competing with its partners.
He did, however, say that the purchase will likely be the first of many mergers and acquisitions in the search space.
"There is going to be a lot of activity. This is just the beginning; by no means is the landscape settled yet."
(Additional reporting by Ben Berkowitz in Los Angeles and Jeffrey Goldfarb in New York)
02/18/03 20:36 ET
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