Yahoo to buy GeoCities
BY SAUL HANSELL
New York Times
Leading Internet portal Yahoo Inc. has agreed to buy Geocities, another popular site, financial executives briefed on the deal said on Wednesday night.
Late Wednesday, Santa Clara-based Yahoo scheduled a conference call with analysts for Thursday. But Diane Hunt, a Yahoo spokeswoman, declined to comment on the call's topic on Wednesday night.
Geocities executives did not return calls on Wednesday night.
The executives would not comment on the price that Yahoo will pay. But analysts said that the transaction would most likely be similar to @Home Corp.'s recent agreement to buy Excite, one of Yahoo's chief competitors. In that all-stock deal, At Home paid a 40 percent premium over Excite's average stock price in the 30 days before the deal. Geocities has a market value of $2.3 billion, and thus a 40 percent premium would value it at about $3 billion.
Shares of Yahoo fell $15.38 on Wednesday, to $335.87; Geocities rose $4, to $75.
Yahoo is the top-rated of the Internet sites that have come to be known as portals because they serve as gateways to a wide range of information and online services. But most of its competitors have recently been bolstered through acquisitions.
@Home is starting to offer fast Internet services over cable television wires. Netscape, with its Netcenter portal, was bought by America Online. Infoseek, another portal, was partially bought by the Walt Disney Co. and folded into its new portal, the Go Network. The Microsoft Corp. has redoubled its efforts to promote its MSN portal. And just this week, the Compaq Computer Corp. announced plans to expand and partially spin off its Alta Vista portal service.
''Given the acquisition of Excite last week, the perception was that Yahoo had to do a deal,'' said Paul W. Noglows, an analyst at Hambrecht & Quist in San Francisco. ''Geocities would not only give them incremental traffic but also the most significant player in the community space.''
Geocities is the leading service that creates electronic communities of people who share various interests. It mainly allows people to set up their own home pages on the Internet on any topic from family photos to sports-car collecting. With more than three million members, it is among the most popular sites on the Internet.
In December, Geocities.com was the third-most-visited Web site, with 19 million unique visitors, according to Media Metrix. The top-rated site was America Online's site, Aol.com, with 28 million visitors. Yahoo was No. 2 with 27 million.
Geocities hopes to profit by selling advertising that appears on these home pages. But its revenue growth has been slower than other Internet companies because many advertisers are shy about placing their messages on pages that Geocities does not have direct control over.
Such community features, however, are increasingly being folded into the broader array of services offered by portals. Infoseek, Lycos and Excite have all bought smaller community-oriented services.
Yahoo tried to buy Geocities last year but was rebuffed when Geocities chose to make an initial public offering instead. Yahoo already has a small stake in Geocities, and the Softbank Corp. of Japan has investments in both.
Increasingly, the venture capitalists who have backed a variety of specialized Internet start-ups are encouraging the companies in their portfolios to combine into larger entities.
For example, Kleiner Perkins Caufield & Byers has major stakes in both Excite and @Home.
NEW WARNINGS ISSUED ON ONLINE TRADING
By Jonathan Rabinovitz
Mercury News Staff Writer
The drumbeat of warnings about the mania surrounding online trading and pricey Internet-related business stocks grew ever louder Wednesday, though investors paid little attention to the advice, causing prices of web-related companies to jump yet again.
By the time the Nasdaq market closed, for instance, San Jose-based eBay Inc., an online auction company, recorded what once would have been regarded as an astounding 34 percent increase. This followed a report that fourth quarter earnings per share were a few cents higher than some analysts expected. The stock price increased $86.23 to close at $303.50.
It sold for $18 a share four months ago when it was introduced to the market.
This jump occurred despite the latest voice of caution: the usually circumspect Securities and Exchange Commission Chairman Arthur Leavitt, who issued a statement airing his concerns about the risks in electronic trading.
''On-line investors should remember that it is just as easy, if not more, to lose money through the click of a button as it is to make it,'' he said.
While Leavitt's remarks did not specifically address the skyrocketing values of Internet companies, like Amazon.com and eBAy Inc., his statement may have been intended to give people pause about these stock prices. The rapid increase in the cost of these stocks is largely driven by day traders and other individual investors new to the markets who buy and sell through the World Wide Web.
Leavitt said he was ''very, very concerned'' by recent stories of investors who were using mortgages and student loans for day trading. Over the last year, the number of complaints about online trading have increased by 330 percent, and individuals need to be careful, he said.
Still, these cyber-stocks continued to outpace the market Wednesday even as many market professionals described the internet sector's growth as a huge speculative bubble that is bound to burst.
One stock barometer, The Interactive Week Internet index, which includes 50 internet-related companies, has increased by 17 percent since January 1, while perhaps the most traditional index, the Dow Jones Industrial Average remained flat. On Wednesday alone, the Internet index increased 1 percent, while the Dow actually dropped 1 percent.
Perhaps no company Wednesday better reflected the internet craze than eBay, which ended the day with a market value of about $12 billion -- a 17-fold increase since its initial public offering in September. According to Bloomberg, that is roughly eight times the value of the venerable auction house, Sotheby's Holdings Inc.
To be sure, some analysts maintain that eBay is worth it. ''We believe eBay's results highlight the company's dramatic growth potential and extraordinarily profitable business model among many profitless Internet peers,'' said Keith E. Benjamin, a BancBoston Robertson Stephens managing director, who reaffirmed Wednesday his ''Buy'' recommendation for the company.
Yet it appears that such bullish voices are increasingly being countered by more skeptical ones.
''It's crazy,'' said Michael Murphy, editor of California Technology Stock Letter in Half Moon Bay, when asked about eBay's jump Wednesday.
A fraud investigation involving eBay customers is one potential problem, Murphy said. There also are serious questions about what happens when new online auction houses are established, he added.
But most significantly, the ratio of eBay's stock price to projected earnings for 1999 -- a traditional way to value a company's stock -- was 1,377 after Wednesday's increase. That is at least 45 times the outer limits of what investors would accept in the past, and even that projection is based on questionable earning projections, Murphy said.
By contrast, the Interactive Week index had a price to earnings ratio of 2,863 at the end of Wednesday, the Nasdaq Composite index's ratio was about 71 and the Dow's was 24.
The increases in internet-related stocks have created ''the mother of all bubbles,'' said Murphy, whose publication's most recent issue warns that it is only a matter of time before it breaks.
While the number of internet company shares has not been enough to meet market demand, the supply is expected to increase substantially soon. A host of public offerings are expected over the next few months that will make more internet stocks available. And the freeing up of stocks that were required to be held off the market for a set time should further add to the supply.
These potential difficulties for the internet stocks should be seen against the backdrop of possible weaknesses in the financial markets at large.
Reuters reported that the drop in the markets Wednesday came as nervous investors worried that Federal Reserve Chairman Alan Greenspan will focus on the high level of stock prices when he testifies before a Senate Committee Thursday morning.
Only last week, Greenspan gave many traders a moment's doubt when he told the House of Representatives Ways and Means Committee that the markets remain ''fragile.'' After noting that corporate profits have been dropping, he remarked, ''The level of equity prices would appear to envision substantially greater growth of profits than has been experienced of late.''
Concerns about ''volatile market conditions'' were also expressed this week by officials at Nasdaq, who issued new guidelines and rules in response to the potential troubles. Along with suggesting that sellers and buyers be better informed on how transactions are conducted, Nasdaq also extended the time period when initial prices are first set for new public offerings, a moment when some of the most severe increases in stocks occur.
''Nasdaq continues to explore longer-term options to address the issue of the volatility of internet stocks,'' said S. William Broka, senior vice president of Nasdaq's trading and marketing services department.
The note of caution was even struck by Jeff Bezos, the founder and chief executive of Amazon.com, the online book store whose market value has more than doubled over the last three months.
Amazon closed at $125.63 per share Wednesday, up $10.53 or 9 percent. That came after the company disclosed fourth quarter figures that showed substantially higher revenues than analysts had expected -- even though it has not reported a profit. Indeed, the company said it had losses of 14 cents a share, much higher than last year's 8 cents a share loss, but less than the 18 cents a share loss that had been the market consensus projection.
''Amazon stock has been extraordinarily volatile,'' Bezos was quoted by Reuters as saying in a conference call, warning that the stock is risky. ''It should be only a small fraction of any individual's investor's portfolio, and it shouldn't be any fraction of a short-term trader's portfolio.''
Leavitt, the nation's chief securities regulator, seemed to be echoing that sentiment more broadly in his statement: ''The Internet and other new technologies are in many ways transforming how our capital markets operate. There are clear benefits to these changes including lower costs and faster access to the market for investors. I believe that investors need to remember the investment basics, and not allow the ease and speed with which they can trade to lull them either into a false sense of security or encourage them to trade too quickly or too often.''
|
