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

To: PCSS who wrote (45490)	1/27/1999 7:02:00 AM
From: Kenya AA	Read Replies (3) \| Respond to of 97611

Michael: I believe it was EL who called IR. From today's IBD ... CPQ RS up to 94 - A/D rating A Compaq Spins Off AltaVista To Cash In On Internet Date: 1/27/99 Author: Pete Barlas The Internet is growing fast, and Compaq Computer Corp. is looking to cash in on the trend. Compaq announced plans Tuesday to spin off its Internet search engine, AltaVista Co. , into a wholly owned subsidiary. It also will launch an initial public offering for AltaVista later this year. Compaq is hoping to boost AltaVista's presence on the Web by adding more services such as online retail shopping, says Rod Schrock, the spinoff's newly appointed president and chief executive. Schrock previously served as senior vice president of Compaq's consumer product group. ''We are focused on making AltaVista the No. 1 destination site for information and electronic commerce,'' Schrock said. ''(The split) should put us in a better situation for more revenue growth.'' Compaq expects to boost AltaVista's electronic- commerce offering by combining the search engine with Shopping.com, an online retailer purchased by Compaq three weeks ago for $220 million. Even though it is spinning off AltaVista, Compaq does not intend to lose control of the company. ''It's our intent to maintain a majority ownership,'' Schrock said. Schrock declined to state how much Compaq's stake would be, nor did he describe how active a management role the world's top PC maker would take. By combining AltaVista with Shopping.com, Compaq hopes to turn the spinoff into a portal company, or gateway to the Web. Such a move should help increase the company's value. AltaVista also plans to increase its audience through a partnership with Microsoft Corp.'s MSN Internet service. AltaVista would be one of the featured portals on the MSN site. ''I expect (AltaVista) will grow in income and popularity,'' Schrock said. Some analysts, though, are not as convinced. To date, AltaVista lags behind Yahoo Inc., Excite Inc., Lycos Inc. and several other portals. ''I don't see this move (by Compaq) changing the landscape a lot,'' said Barry Parr, e-commerce analyst for International Data Corp., a Framingham, Mass.-based market researcher. ''It's going to continue to be a big battle among portals on the Net in '99.'' AltaVista could challenge for a bigger audience by beefing up its content offerings, says Paul Gillin, editor-in-chief of industry trade publication Computerworld. ''Building a strategy as a portal company is something that up to now AltaVista has not done,'' he said. Schrock discounts the naysayers. He says Compaq's track record in the computer industry should give an indication that it will be successful with the Internet. ''When the computer industry was 3 years old (in 1985), we weren't even in the top five among computer manufacturers. Now we are No. 1,'' he said. Compaq inherited AltaVista when it purchased Digital Equipment Corp. in June. The exact date of AltaVista's public offering is not determined. But while AltaVista may struggle to gain acceptance with Web audiences, it likely will have an easy time raising money from its public offering, analysts say. AltaVista should have little trouble raising $2 billion or more, pundits agree. The amount would stand as a new initial offering record among Internet companies. ''They could probably raise $2 billion-plus. The market for portals is really hot right now,'' said Ford Cavallari, Internet strategy analyst for Renaissance Worldwide Inc., a management consulting group. Computerworld's Gillin agrees. ''If they take it public, they could raise at least $2 billion. It's a great way to generate cash - it's easy money,'' he said. Compaq's move comes at a time when valuations for Web-based companies are going through the roof. Last week, AtHome Corp. announced plans to acquire Web portal company Excite Inc. in a stock deal valued at $6.7 billion. Meanwhile, valuations for other Web portals are soaring. Yahoo's stock price, for example, was trading at 351 a share on Tuesday, putting its market cap at $34.6 billion. Analysts say AltaVista will have to become a one- stop portal like Yahoo and others if it is to achieve such epic values. ''The way you rise to that level is by creating services that make people want to keep coming back and using your service,'' Gillin said.