AltaVista stake sold to CMGI for $US2.3B

Compaq Computer's deal last week to transfer majority ownership of the AltaVista.com search engine to Internet and direct marketing investor CMGI should benefit the parties involved, but some observers say Compaq gave up a real Internet asset.

Compaq Computer 's deal last week to transfer majority ownership of the AltaVista.com search engine to CMGI should benefit the parties involved, but some observers say Compaq gave up a real Internet asset.

CMGI, an Andover, Massachusetts-based investment firm with annual revenue topping $US100 million, helps develop and operate Internet and direct marketing companies. Its $2.3 billion purchase gives it an 83 percent majority stake in the AltaVista enterprise.

Former owner Compaq Computer will own the remaining portion while gaining a seat on CMGI’s board of directors and a 16% stake in CMGI.

The two companies said they will also collaborate on unspecified Internet research and technology that will be one of the cornerstones to Compaq’s future online direct sales efforts.

And CMGI CEO Dave Wetherell said AltaVista would use Compaq’s technology and CMGI’s Internet sites to appeal to both consumers and business users.

Among CMGI’s holdings is a 20 percent share of search portal Lycos Inc. Before the AltaVista purchase, CMGI was facing potential tax classification and government regulation as a mutual-fund company because of its widespread investments. But a majority stake in AltaVista removes that problem.

Several analysts considered AltaVista a true Internet gem, but site development had begun to languish behind rivals’ -- such as Yahoo Inc. and Go.com -- moves into the online portal realm.

“To run AltaVista the right way requires a set of skills Compaq doesn’t seem to possess,” said James Meyer, an analyst at Janney Montgomery Scott Inc., a Philadelphia investment firm. “The people who successfully run [Internet] businesses don’t come out of the traditional Compaq-type world.”

But Art Russell, an analyst at Edward Jones & Co., a St. Louis investment firm, said AltaVista can still be a vital part of Compaq’s online sales, customer service and Internet branding efforts by promoting Compaq links and after-sales services.

The sale came just as AltaVista unveiled more than 20 new Web site features. The site now includes multimedia search capabilities, a “freshness guarantee” for search results and a minisearch tool that lets users check stock quotes and other news tidbits without clicking outside the page.

After almost a week of takeover talks with CMGI, Rod Schrock, AltaVista’s CEO, said that the Compaq deal will provide AltaVista with a clearer future.

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