HHMMMMmm -- bet CPQ is locked into a hold!
B: IPO OUTLOOK: AltaVista is solid product, but bad investment
By Scott Reeves, Bridge News
New York--Mar 24--AltaVista may be the Flying Dutchman of the new
issues market.
In the maritime legend, the Flying Dutchman was ghost ship doomed to
sail the seas forever and seamen believed its appearance signaled
imminent disaster.
AltaVista, despite the range of its content and powerful search
capabilities, has bounced from Digital Equipment Corp. to Compaq
Computer Corp.
(CPQ) to CMGI Inc.(CMGI) and now, out of the mist, it heaves -- more
than a little late -- into the IPO market.
The planned offering, helped by Morgan Stanley Dean Witter's clout,
will show some life in early trading. But AltaVista lags far behind
industry leader Yahoo (YHOO), omnipresent America Online (AOL),
heavy-hitter Lycos (LCOS) and Infoseek, now part of Walt Disney (DIS).
This makes AltaVista's long-term prospects uncertain.
Without the backing of a major company like Time Warner or CBS,
AltaVista probably will have difficulty securing top-notch content and
attracting new users in the future. Without steady growth, AltaVista's
advertising and e-commerce will lag.
Worse, the battle to establish Web portals appears to be about over.
Advertisers and users are comfortable with competitors and AltaVista
may be too far behind to catch up -- especially because it offers
nothing new or special to entice anyone away from its rivals.
In short, AltaVista simply may lack the sail to effectively challenge
its sleek competitors.
Lisa Allen, an analyst at Forrester Research in Cambridge, Mass.,
noted that CMGI walked away from its "core competency" when it picked
up AltaVista.
"CMGI has made a name by turning start-ups like Lycos and reel.com
into household names -- by growing small Web companies into mature
businesses," Allen said in a report. "Now, CMGI is saddled with an
established operating business in need of a turnaround. While the deal
may let CMGI pass financial muster as a holding company, its vision of
a 'mega portal' anchored by AltaVista won't be helped by CMGI's
properties,
including ragingbull.com and furniture.com, that lack the 'oomph' of an
espn.com and disney.com boosting The Go Network."
Figures from Media Metrix, the Internet eyeball counter, show that
AltaVista was the 13th most visited Web site in February with 12.3
million unduplicated visitors. America Online is top of the heap with
57.6 million visitors and is followed by Yahoo (#2) with 45.5 million;
Lycos (#4), 31.6 million; Excite At Home (#5), 30.2 million and Go
Network (#6), 21.3 million. Ask Jeeves (#15) ranks two notches below
AltaVista with 11.2 million visitors.
GATEWAY TO THE INTERNET
AltaVista is an Internet search, new media and e-commerce network
designed to deliver personalized information and services to users worl
dwide. The company seeks to become a single Internet destination for
search, information, communications and e-commerce.
The potential market is huge. International Data Corp. estimates that
the number of Internet users will grow to about 502 million by the end
of 2003 from 142 million in 1998, a compound annual growth rate of
about 29 percent. Internet advertising revenues in the U.S. are
expected to increase to $11.5 billion by 2003 from $2.1 billion in
1998, Jupiter Communications reports. Consumer purchases via the
Internet in the U.S. are expected to increase to about $184 billion in
2004 from $20 billion in 1999, according to Forrester Research.
COMPANY HISTORY
AltaVista first operated as a unit of Digital Equipment Corp. Compaq
Computer acquired Digital in June 1998 and in January 1999, AltaVista
began operating as a separate business unit within Compaq.
Compaq then began a string of acquisitions to extend AltaVista's
reach. In Feb 1999, it acquired Shopping.com, an e-commerce company,
and in April 1999, it acquired Zip2, a local portal service.
In August 1999, Web holding company CMGI acquired about 81.5 percent
of AltaVista's stock and Compaq retained the remaining 18.5 percent.
AltaVista received Shopping.com and Zip2 as part of the acquisition. In
October 1999, AltaVista acquired iAtlas' filtering technology from CMGI.
In Feb 2000, AltaVista acquired Raging Bull, a provider of financial
information and an affiliate of CMGI. In Feb 2000, it also picked up
Transium Corp., a provide of scalable hosted search services designed
to make content manageableand searchable and provide fast search results.
THE PLANNED OFFER
AltaVista Co. of Palo Alto, Calif. plans to offer 14.8 million
shares, including 2.96 million set aside for international investors,
at $18 to $20 each through underwriters led by Morgan Stanley Dean
Witter. The proposed Nasdaq symbol is ALTA.
There will be about 154 million shares outstanding after the IPO.
CMGI will hold about 73.8 percent of AltaVista's stock upon completion
of the offering.
Net proceeds raised in the IPO will be used for working capital,
sales and marketing, general corporate purposes and possible acquisitions.
For the three months ended Jan 31, 2000, AltaVista reported a net
loss of $270.6 million on revenues of $50.1 million. For the year ended
Dec 31,
1998, the company reported a loss of $949.1 million on revenues of
$45.3 million.
Competitors include America Online, CNet, Direct Hit, Excite, Go
Network, Google, HotBot, Inktomi, Lycos, Microsoft Network, Northern
Light and Yahoo.
NOT A BUY AND HOLD
AltaVista faces daunting competition and its long-term prospects are
uncertain.
Both Yahoo and Lycos have a bigger market share than AltaVista and
have become seasoned, top performing stocks. For many investors, there
may simply be no room, or need, to add AltaVista to their portfolio.
There will be some early pop in the deal, but the stock soon will
drift aimlessly like the Flying Dutchman. It's probably wise to get in
and out of AltaVista's IPO quickly. End |
