Yahoo! Is in Talks to Acquire
Web Community GeoCities
By KARA SWISHER
Staff Reporter of THE WALL STREET JOURNAL
Yahoo! Inc. is in talks to acquire GeoCities Inc. in a deal that
could be announced as early as Thursday, said people
familiar with the negotiations.
If culminated, the accord would be another in a series of
transactions that have been sweeping the Internet industry in
recent months, as larger players seek to increase their market
share by acquiring smaller ones. At Home Corp. agreed last
week to buy Yahoo competitor Excite Inc. in a transaction
valued at $6.7 billion at the time. And America Online Inc. is
in the final stages of completing its acquisition of Netscape
Communications Corp., which was valued at $4.2 billion at
the time it was struck in November.
Yahoo, the Santa Clara, Calif., Web search and directory
service, typically called a "portal," already has existing ties
with GeoCities. It made a minority investment in GeoCities
last year and also struck a wide-ranging cross-promotional
relationship with the Santa Monica, Calif., community site
that hosts Web pages created by individuals. Also, it shares
a common major investor -- Softbank Corp. of Japan owns
large stakes in both companies.
GeoCities Shares Jump
Terms of the possible deal couldn't be determined, but
GeoCities is valued at $2.5 billion, a lofty market valuation
that is part of an overall boom in the stock prices of Internet
companies in recent months. But any agreement, said people
familiar with the talks, would likely be at some premium of its
current valuation, in the wake of similar acquisitions of other
such companies.
On the Nasdaq Stock Market Wednesday, GeoCities stock
closed at $75, up $4, hitting a new high. It has traded as low
as $13.25 over the past year.
Like many Internet companies, GeoCities has commanded
these soaring stock prices, even though it hasn't recorded a
profit since it went public last summer. The company, which
is scheduled to announce its fourth-quarter earnings
Thursday, reported a loss of $4.1 million, or 14 cents a
share, for the third quarter on revenue of $5.3 million.
That kind of bottom line hasn't stopped the frenzied deal
making around companies such as GeoCities, especially
because of their large amounts of Web traffic. The
December results from Media Metrix, a Web-research
company, placed the "Geocities.com" site in third place, with
18.98 million unique visitors, behind AOL's "AOL.com" site,
with 28.3 million unique users and Yahoo's main
"Yahoo.com" site, with 26.8 million users. A combination of
Yahoo and GeoCities traffic -- depending on how much their
individual audiences track over each other's -- would vault it
to the No. 1 spot in terms of Internet traffic.
It also would give Yahoo -- which hasn't made any major
acquisitions, despite its enormous market value -- another
brand name, suggesting a possible "network" strategy being
employed by AOL and others.
Expanding Its Reach
Yahoo currently has a $38.4 billion valuation. Its shares,
which have been extremely volatile in recent weeks in the
wake of investor concern about other Internet deals, closed
at $335.875, down $15.375, on the Nasdaq Stock Market.
Some kind of deal to expand its reach has been expected by
Yahoo, which is one of the few independent Internet
companies without a link to a major media partner. In
addition, GeoCities also has been searching for a partner and
has been in largely unsuccessful talks with a number of
companies in recent months, including AOL, Excite and
Microsoft Corp.
It is part of an overall consolidation, say analysts. Recently,
Infoseek Corp. has linked its fate with that of Walt Disney
Co. with a new portal effort called Go. And Snap! --
created by CNet Inc. -- is now owned in part by General
Electric Corp.'s NBC division.
Yahoo has no such partners and its executives have insisted
that it plans to remain independent. But, if it acquires
GeoCities, the move represents a major shift in its strategy
that has exclusively focused on the Yahoo brand.
"If they buy GeoCities, it's the first time that Yahoo will
acquire a property that they plan to profile on the site besides
themselves," said Andrea Williams, an analyst with Volpe
Brown Whelan in San Francisco. "So far, Yahoo has
focused on building its brand, so this will be interesting."
Yahoo is scheduled to hold a conference call with analysts
Thursday. Yahoo officials declined to comment, and
GeoCities executives didn't return calls seeking comment.
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