Compaq To Unveil New Altavista Internet Strategy
Monday January 25 9:44 PM ET
By Eric Auchard
NEW YORK (Reuters) - Compaq Computer Corp. (NYSE:CPQ - news) Tuesday plans to announce its evolving strategy for AltaVista,
the popular Internet search guide inherited as part of last year's $8.4 billion acquisition of Digital Equipment.
Jim Finlaw, a spokesman for Houston-based Compaq, the world's largest maker of personal computers, said late Monday the
announcement would center on how the company planned to transform AltaVista and ''take it to the next level.''
He declined to comment further ahead of a news conference, at 10:00 A.M. EST (1500 GMT) Tuesday in New York. Eckhard Pfeiffer, Compaq president and CEO,
and Rod Schrock, senior vice president of its consumer products group, are slated to speak.
AltaVista, which bills itself as a leading Internet navigation guide, ranked as the No. 12 most visited Web site in December according to market research from Media
Metrix, which tracks Internet usage among computer users at home and work.
Analysts were divided on whether the news would involve another acquisition following Compaq's recently announced $220 million deal to acquire online retailer
Shopping.com, which Compaq plans to twin with AltaVista.
Other options could include partnerships with established Web sites or internally developed enhancements to the site.
''Compaq is probably planning to spin-off AltaVista,'' said John Robb, an Internet analyst with consulting firm Gomez Advisors of Concord, Mass. He said he had
no specific knowledge of Compaq's planned announcement Tuesday.
''AltaVista is a prime target for going out and raising a couple of billion dollars in this kind of market,'' Robb said. ''I think Compaq just wants to take it public or
take a portion of it public. Here's a chance for everyone to get flush.''
But Ashok Kumar, a financial analyst who follows Compaq for brokerage Piper Jaffray, said a spin-off would be premature.
Instead, Compaq may announce new strategic partnerships for AltaVista on the road to a potential spin-off down the road.
''They need to build critical mass for AltaVista first,'' Kumar said. In particular, he dismissed the chance that Compaq would acquire another top-tier Internet player,
citing the rich valuations of many publicly-traded Internet companies.
AltaVista became a unit of Compaq when the computer maker closed its acquisition of Digital Equipment Corp. in June.
In recent months Compaq has set out to demonstrate its continued commitment to AltaVista. Many analysts viewed AltaVista as an awkward stepchild that moved into
Compaq's house after the marriage to Digital Equipment, a company mainly focused on computer hardware and systems integration work.
Monday, speculation centered on what some analysts say is the probability Compaq will sooner or later seek to spin off AltaVista and related Web properties in a bid to
attract the higher valuations that so-called ''.com,'' or Internet-based companies attract compared to traditional technology firms such as Compaq, a computer giant
with roughly $40 billion revenues.
The move would parallel the previous plans of Digital Equipment, which had readied AltaVista for a spin-off prior to Compaq's move to buy Digital in early 1998,
analysts noted.
Instead of competing with other so-called ''portals,'' AltaVista has remained focused on its core strength as a search system and guide to other Internet sites.
In the last year, AltaVista has resisted the rush by long-time rivals like Yahoo! Inc., Excite Inc. (Nasdaq:XCIT - news) and Lycos Corp. to diversify into catch-all
Internet media sites. Such sites cater to activities beyond Web searching, like online chat, news, shopping and free e-mail.
Analysts said AltaVista may have missed the boat by failing more quickly to become a catch-all Internet media ''portal,'' or destination site that can attract a wide
potential audience of online ad viewers and electronic commerce customers.
The growing audience reach of sites like Yahoo in turn have propelled their sky-high stock valuations.
''By focusing just on search and not on all the additional services to flesh AltaVista out as a portal, the company has missed out on a phenomenal opportunity,'' Robb
said.
He noted that Compaq's recent three-year renewal of a prior deal with online advertising network DoubleClick Inc., which acts as the sales force for selling advertising
on AltaVista, suggests the limits of Compaq's ambitions.
If AltaVista had its own direct ad sales force it would keep the company in closer touch with fast-changing business trends on the Internet, Robb argued.
Nonetheless, AltaVista officials have said in recent months they remain committed to becoming among the top 3 busiest sites on the Web, with the latest evidence its
move to add online shopping capabilities through the purchase of Shopping.com. |
