Yahoo Inc. said it will buy GeoCities in a stock deal worth around US$4.7 billion.
Yahoo will issue 0.3384 shares of its common stock for each share of GeoCities common stock and all outstanding GeoCities options will be converted into Yahoo options, according to Jeff Mallett, president and chief operating officer of Yahoo. Yahoo expects to take a one-time charge related to acquisition expenses in the second quarter of this year.
Yahoo was attracted to GeoCities primarily because the company has created and hosts more than 3.5 million World Wide Web sites, according to Mallett.
"The core component was the member base that they have built," Mallett said.
However, GeoCities' technology for back-end publishing and its personal publishing tools were also important for the deal, according to Mallett. The merged company expects to reach more than 58 percent of those who use the Internet at home and at work, he said.
Analysts said the deal did not surprise them. There is currently a merger frenzy among Internet companies, ignited in part by At Home Corp.'s purchase of Excite Inc., according to Scott Smith, director of Internet business strategy at Current Analysis in Sterling, Virginia.
"There's a need to consolidate to compete, because of the growing size of the players," Smith said. "It's just an effort to get bigger to become a stronger and stronger magnet for users."
Another analyst agreed.
"The basic issue here is that Yahoo is facing a competitive landscape peopled with soon-to-be dominant players," including America Online Inc. and Netscape Communications Corp. as well as At Home and Excite, said Jack Staff, chief economist with Zona Research Inc., based in Redwood City, California.
There will be little change for users, since Yahoo will probably want to continue the two companies' services, which have loyal followers, analysts said.
"I wouldn't expect that users would really notice too much of a difference," said Anya Sacharow, an analyst with Jupiter Communications in New York.
Yahoo's Mallett confirmed that the company will not subsume GeoCities, which will even keep its offices in Marina Del Rey, California.
"The GeoCities brand and dedicated service will continue (as) Yahoo GeoCities," Mallett said.
But users will notice a difference, he said. GeoCities' publishing tools and communities' content will be put on top of existing Yahoo areas, and GeoCities will have the opportunity to expand to the 17 countries in which Yahoo already has a presence, according to Mallett and Tom Evans, president and chief executive officer of GeoCities.
The agreement must pass federal regulatory scrutiny before being completed, and is expected to be finalized in the second quarter of this year.
Yahoo, in Santa Clara, California, can be reached at +1-408-731-3300 or at http://www.yahoo.com/. GeoCities, in Marina del Rey, California, can be reached at +1-310-827-3700 or at http://www.geocities.com/.