PALO ALTO, (Calif): Internet search company Overture Services Inc on Tuesday said it would buy Web portal AltaVista from CMGI Inc in a US$140mil deal aimed at boosting its own “competitive advantages.”
Overture, which gives advertisers a way to bid for well-placed spots among Web search results distributed to partners like Yahoo Inc and Microsoft Corp’s MSN, agreed to pay AltaVista with common stock currently worth US$80mil plus US$60mil in cash. It also said it would assume some of AltaVista’s liabilities.
AltaVista’s selling price is a far cry from the last one fetched by the company, which is best known for being one of the first to offer an easy way to search the Web.
In 1999, now-struggling CMGI paid Compaq Computer Corp US$2.3bil for an 83% stake in Palo Alto, California-based AltaVista. Compaq has since merged with Hewlett-Packard Co.
US Bancorp Piper Jaffray analyst Safa Rashtchy said AltaVista has solid core technology and plenty of patents, but hasn’t done a great job lately of translating those assets into products.
“There’s a chance for Overture to rejuvenate that potential,” Rashtchy told Reuters.
The acquisition, which is slated to close in April, is expected to be “dilutive in the near term,” Overture chief financial officer Todd Tappin said during a conference call with analysts.
Tappin declined to update Overture’s guidance, saying the Pasadena, California, company was still working out integration plans and future strategies.
Nevertheless, Overture said it sees the purchase adding to earnings by mid-2004.
Competitive questions have been front and centre in analysts’ minds since Yahoo announced late last month that it had hired Overture’s vice-president of search to do the same job in its search unit.
Although both companies have said their relationship remains strong, some analysts have speculated that Yahoo might be exploring the creation of its own internal paid-search products.
“We were not motivated to act by other external factors,” Overture president and chief executive Ted Meisel said during the company conference call.
“We do not believe we are creating a competitor for our partners,” he added.
Meisel said the tie-up would help Overture strengthen its offerings, allow the company to syndicate AltaVista’s advanced algorithmic search technology that scours the Web for answers to users’ queries, and give Overture a place to test new products and services before rolling them out to partners. – AP