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Technology Stocks : Compaq -- Ignore unavailable to you. Want to Upgrade?

To: PerryA who wrote (63968)	6/23/1999 4:56:00 AM
From: rupert1	Respond to of 97611

June 23, 1999 CMGI Is in Talks With Compaq to Buy Web Properties, Including AltaVista By JON G. AUERBACH Staff Reporter of THE WALL STREET JOURNAL CMGI Inc. is in talks to purchase AltaVista and other Internet assets from Compaq Computer Corp. for $2 billion to $3 billion in stock. A deal could be announced as early as Thursday, according to people familiar with the situation, though talks could still break down. Such an acquisition could significantly bolster CMGI, helping the Internet investment company transform itself into a major Internet media outlet with a powerful Web presence. AltaVista would give CMGI a brand-name Web site, which it could use to anchor its 40 or so Web properties, helping it battle rivals, including Yahoo! Inc. Company Profile: Compaq Computer For Compaq, Houston, selling AltaVista (www.altavista.com) and other Web properties would be a surprising about-face. Earlier this year, Compaq said it would spin off AltaVista in an initial public offering. E-Commerce Strategy Lagged But despite its announced intentions for AltaVista, Compaq, the world's largest maker of personal computers, has been slow to pull together an e-commerce strategy. While competitors have developed Internet software and focus, Compaq picked up AltaVista through its purchase of Digital Equipment Corp. a year ago and only recently acquired its other properties and created a separate Internet subsidiary. That unit's possible sale suggests that Compaq Chairman Ben Rosen now wants to keep the company's focus on selling computer hardware and services. Indeed, the possible sale of AltaVista comes amid big upheaval at Compaq. Compaq is losing money, and its sales are flattening. The company has been searching for a new chief executive since dismissing longtime CEO Eckhard Pfeiffer in April. Amid rumors of a possible deal, CMGI dropped $8.0625 to close at $94.9375 in Nasdaq Stock Market trading. Meanwhile, on the New York Stock Exchange, Compaq jumped $1.6875 to close at $23.8125. One person close to the matter also said that CMGI remains interested in a possible purchase of Lycos Inc. CMGI owns an 18% stake in Lycos, the No. 2 Web portal, and has been holding talks with Lycos over the past several weeks. This person says an AltaVista deal would not preclude a future Lycos purchase. Deal Would Include AltaVista A deal with Compaq, if completed, would give CMGI the AltaVista search engine, currently one of the top 10 sites on the Internet, as well as Shopping.com, an e-commerce site, and Zip2.com, which offers local content, say people familiar with the matter. The three companies are projected to record about $250 million in sales this year but are not profitable, these people say. Officials from CMGI, Andover, Mass., declined to comment. Compaq said it couldn't comment on rumors or speculation. Officials from Lycos, Waltham, Mass., didn't return calls. CMGI has reaped billions of dollars from early investments in hot Internet companies including Lycos and GeoCities. But its Web presence is relatively small, as none of the sites it controls outright are household names. CMGI, which reported sales for the first nine months of $120 million, commands a stock market valuation of about $9 billion. Although AltaVista commands a huge presence on the Web because of its ability to conduct fast and thorough searches, the site has languished in recent years as rivals including Yahoo and Lycos have been quicker to build themselves into portals, which include shopping, weather and news. AltaVista is planning a total relaunch of its site at the end of this month, one person familiar with the plans says. The new site will include a focus on local portals and an updated store that sells everything from computers to grills. The site also adds audio and video searches to AltaVista's search capabilities, this person says. --Evan Ramstad contributed to this article.

To: PerryA who wrote (63968)	6/23/1999 5:22:00 AM
From: rupert1	Respond to of 97611

1. In the WSJ article, the potential CMGI deal is spoken of as a "stock" deal of $2-3 billion. Other speculation, so far, ranges from (a) $500 million for AV, $500 million for Shopping.con and zip2.com (b) $1 billion cash and $1 billion in CMGI stock (c) $2 billion in cash and $1 billion in CMGI stock (d) $2-3 billion in CMGI stock (e) an equity partnership deal prior to a spin-off. 2. COMPAQ was said to have $3.6 billion cash in 1Q, but is expected to make a loss of up to $250 million this quarter. There was a cash sale of the Alto Palo internet station, but the overall effect of the operating loss should be to decrease assets or increase liabilities this quarter. Even if there is no operating loss in the 3Q, a substantial charge to cover the re-structuring is to be taken in the 3Q. Some or all of it, depending on what it covers, might further deplete the cash reserves in 3Q. There is a case to be made that COMPAQ needs to strengthen its cash reserves if it expects losses, break-even or weak profits going forward for several quarters, or if it needs to make strategic acquisitions. 3. The sale of AV would look like a major reversal in a strategy which was confirmed by Rosen as recently as the AGM. Unless he were to define a sale to CMGI as one of the options for "spinning off" he said COMPAQ was considering. 4. If it divests of AV, and possibly some other assets, COMPAQ not only becomes leaner and more focussed company, but also a more digestible acquistion target for a stronger company. I am not suggesting this will happen, but it becomes more feasible.