>>ASSOCIATED PRESS
April 2, 1999
NEW YORK -- The president of Yahoo! declared yesterday that three companies will dominate the Internet by the end of next year and his company aims to be one of them.
Jeff Mallett's bold call came as he announced that Yahoo!, the Internet's leading search and directory service, will pay $6.08 billion to buy Broadcast.com, the top provider of TV and radio programming on the Web.
"We expect three companies to emerge from the pack exiting the year 2000," Mallett said in an interview. And Yahoo!, Microsoft Network and America Online "are clearly starting to separate themselves."
To ensure Yahoo!'s position, Mallett said the company will continue to make acquisitions and expand in three key areas: media, communications and direct services.
This is Yahoo!'s second major deal this year. In January, the Santa Clara-based company announced it was buying GeoCities Inc., a Web service used by more than 3 million people to publish their writings, post their family photos or try to sell things.
Meanwhile America Online, the largest Internet and online service, recently acquired the software company Netscape as it tries to dominate Web services for both individuals and businesses.
Microsoft is assembling a large array of Web services as well, including travel, car buying and entertainment listings. Its Microsoft Network online service is a rival to AOL although it has been far less successful.
In addition to these powerful competitors, Mallett should be looking over his shoulder for several others.
AT&T just bought the big cable TV company Tele-Communications Inc. and a stake in the high-speed Internet service provider AtHome Corp. -- moves that will make it a major force as consumers abandon slow-moving telephone hookups to the Net and switch to much faster cable TV links.
Amazon.com is positioning itself as the Web's retailing leader. The online bookseller this week launched its own auction service and recently acquired stakes in Pets.com, a pet supplies retailer, and Drugstore.com, an online pharmacy
Traditional broadcasting companies like CBS and Disney's ABC are also hunting for Internet acquisitions. And, Cisco Systems, the computer networking equipment company, wants to replace the telephone with the computer.
Mallett "is only talking about next year," said Jim Balderston, an industry analyst with Zona Research Inc. "Twenty-four to 36 months from now, the order could shift, and there could be newcomers, and the traditional media companies might come in dumping a boatload of cash and making their presences known."
Time is of the essence. The Internet industry is both expanding and consolidating at a rapid pace. New companies go public almost daily and quickly become targets or suitors in corporate takeovers.
Most of the leading Web companies are looking for strategic acquisitions that reflect the integration of computer, television and telephone services with commerce, information and entertainment.
Indeed, many consumers haven't been able to keep up with the blurring changes of the Internet. Most home computers are still a few years away from having the high-speed access to make it easy to watch movies online.
But Todd Wagner, chief executive of Dallas-based Broadcast.com, said, "This is happening much more quickly than any of us ever anticipated." A few years ago, for example, audio on the Internet was full of static like an AM radio. Today, it's nearly CD quality, he said.
Broadcast.com's audio and video business is expected to take off as high-speed access to the Internet -- and a wealth of new services it brings -- becomes more prevalent in the home and office.
However, like most Internet companies, Broadcast.com makes no profits.
Still, the 10 percent premium Yahoo! paid over the market price of its stock didn't bother investors.
"What else is new?" said Charles Lax, a general partner with SoftBank Venture Capital, Yahoo!'s biggest shareholder. "High-speed access (to the Internet) is very important, and this is just an anchor acquisition for that."
Yahoo! stock rose $11.371/2 to $179.75 on the Nasdaq Stock Market, where Broadcast.com's shares rose $11.811/4 to $130.<<
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