Compaq boosts Net offering with Zip2 acquisition

Zip2, a privately held US company, will become an operating division of the AltaVista Company, a division of Compaq that the company plans to spin off.

Financial details were not released, but AltaVista CEO Rod Schrock said the company paid more for Zip2 than it did for the recently announced $220 million (£135 million) acquisition of e-commerce site Shopping.com.

Zip2 works with media companies -- including the New York Times and Knight-Ridder -- to help them develop local content guides. Compaq officials said the acquisition will help the AltaVista site compete on a local level. Local city guides have become a new battleground on the Internet, pitting off-line media companies against Internet portal players.

The acquisition of Zip2 could give AltaVista a strong leg up, however. The company's customers cover the top 60 metropolitan areas in the United States. Schrock said that the AltaVista would work with the media companies to drive traffic to their sites, which would be co-branded with AltaVista. The Shopping.com acquisition will also help local businesses get started selling online, he said.

"This will clearly be a two-way business partnerships. We intend to drive a ton of traffic to these partner sites," he said. "Our goal is to establish them as the dominant regional site."

Compaq acquired AltaVista more than a year ago when it purchased Digital but until recently, has not focused much of its attention on the division. AltaVista was known more for its search technology than for the fringe benefits offered by other search sites, which sought to redefine themselves as destination sites that offered everything from free e-mail to horoscopes.

But Compaq has zeroed in on the division lately, with the acquisition of Shopping.com and the establishment AltaVista up as a standalone unit. In a separate announcement, Compaq said today that it has successfully completed its $220 million tender offer for Shopping.com, and plans to close the merger next month.

Schrock said that with the acquisition of Zip2, "we think we have the three major building blocks," the company needs to make the site a major competitor. "We've got overall search and navigation, e-commerce and local content. Now the challenge is to integrate the three together," he said. Schrock said the integration will take "longer than we'd like" but will be relatively quick. The company plans a "major re-launching" of the site once the integration is complete, but he would not say how long that would take.

Softbank Ventures, a division of Softbank -- parent company of ZDNN publisher Ziff-Davis Inc. -- is an investor in Zip2.