Yahoo! Executive Says Portal Is Scouting for Still More Deals
By KARA SWISHER
Staff Reporter of THE WALL STREET JOURNAL
For a company known for its conservative approach to business, Yahoo!
Inc. is starting to look like the Internet's good-time Charlie.
Within only three months, Yahoo has used more than $10 billion of its
highflying stock to purchase two major Web companies, GeoCities Inc.
and broadcast.com Inc. And Thursday, just after the Santa Clara, Calif.,
Internet "portal" confirmed that it had agreed to spend $5.7 billion for
broadcast.com, the Dallas-based Internet broadcaster, Yahoo executives
implied that more merger mania lies ahead.
Only last fall, those same executives insisted they didn't need to get pulled
into the deal-making frenzy gripping the Internet business. Then came
America Online Inc.'s $10.2 billion purchase of Netscape Communications
Corp., followed quickly by At Home Corp.'s acquisition of Yahoo rival
Excite Corp., a deal valued at $7.5 billion when it was struck. These
mergers reoriented the Internet landscape.
Pulse of Acquisitions
"Yeah," says Yahoo Chief Executive Officer Tim Koogle flatly, when
asked if his company is scouting for more companies to acquire soon. "I
think this is the year for consolidation, which is totally natural given the
history of emerging markets. I think we are in what I call a 'pulsing' period."
By pulsing, Mr. Koogle means the market is figuring out which companies
should be bought and which can be the acquirers. He counts Yahoo among
the latter.
People close to the company say that Yahoo recently has been talking to
more potential partners -- from e-commerce services like CheckFree
Holdings Corp. to sports sites -- about a variety of new alliances. Mr.
Koogle declined to comment on specific talks.
"We think there is a unique value in remaining independent," says Mr.
Koogle, who likens Yahoo to a neutral Switzerland. "We think offering a
wide-ranging service on a global level is a value that never goes away."
Yahoo's twin blockbuster buys have increased its audience reach as one of
the top Internet destinations and added features, but some analysts still
wonder whether the company can remain solo in the long run. They suggest
that Yahoo will need to hook up with an even bigger partner in order to
compete against industry behemoths like AOL.
Acquisitions Increase
Company
Date announced
Price*
broadcast.com
April 1, 1999
$5.7 billion
GeoCities
Jan. 28, 1999
$5.0 billion
Yoyodyne
Dec. 12, 1998
$32.0 million
Viaweb
June 8, 1998
$49.0 million
*Value of stock swap at announcement
What Yahoo is missing, some note, are major distribution pacts with
Internet-access providers, control of important pieces of Internet software
and a major media-company alliance. At Home, for example, owns its own
high-speed network that runs on cable-television systems and is linked
closely with controlling shareholder AT&T Corp. AOL now controls
Netscape's popular Web-browser software, on top of its customer-binding
giant telephone dial-up system. And both CNET Inc.'s Snap and Infoseek
Corp. have close ties to giant media companies, General Electric Co.'s
NBC and Walt Disney Co., respectively.
Others think Yahoo can maintain its freedom without these assets. "I think
at the end of the day if they keep making these strategic acquisitions, it
does not necessarily mean that they have to have a bigger deal," says Paul
Noglows, an analyst with Hambrecht & Quist Inc. in San Francisco, who
notes that Yahoo's $34 billion market value is already higher than that of
many major media companies. "They have to tread very carefully with
bigger alliances, since they can become the media company of the future
without them; they could shoot themselves in the head if they became
AT&T's Yahoo, for example."
Yahoo executives note that they have grown to the top ranks without
selling off big chunks of the company. Instead, they have crafted a series of
smaller marketing and distribution deals -- such as with search sites,
computer companies and access providers -- to attract new Web users to
their site. They also have bought an increasing amount of off-line
advertising to build the company's well-known brand name. And Yahoo
has recently begun talking to cable, wireless and satellite companies to
strike similar distribution arrangements.
"Seeing all the musical chairs of the past year, as our competitors have
been bought up, it seems to have narrowed their services," Mr. Koogle
says. "But distribution has always been and will always be important to us,
though the ways we are distributed may change over time."
That said, the company is still chatting with
bigger players and contemplating more tactical
moves, a shift in attitude that came after
AOL's acquisition of Netscape and the realization among the company's
top brass that Yahoo should use its highly valued stock more aggressively.
Yahoo President Jeff Mallett, for example, said in a recent interview that
Microsoft President Steve Ballmer and Yahoo executives are constantly
talking about a range of possible deals between their companies, and that
Yahoo recently struck a small marketing arrangement in Japan. He also
noted that Yahoo is more than likely to strike some kind of distribution deal
with At Home and perhaps more content alliances with media companies,
too.
"We're in the deal flow," says Mr. Mallett. "We are certainly not wall
flowers anymore."
Separately, shares of RealNetworks Inc. soared 29% in the wake of the
Yahoo-broadcast.com deal, as speculation about the next big Internet
acquisition focused on Seattle-based RealNetworks, a leading maker of
software for transmitting multimedia over the Internet.
RealNetworks supplies the most popular software for tuning into
broadcasts on the Internet, with more than 50 million users. RealNetworks,
whose technology is used by broadcast.com, said it has no interest in being
acquired by another firm. "We emphatically plan to continue on our
independent and successful path," said Steve Haworth, a RealNetworks
spokesman.
In Nasdaq Stock Market trading, RealNetworks' stock closed at a record
high of $157.875, up $35.6875, or 29%, while Yahoo shares rose
$11.375, or 6.8%, to $179.75 and broadcast.com surged $11.8125, or
10%, to $130 a share.
-- Nick Wingfield contributed to this article. |
