Compaq confirms CMGI talks

Compaq Computer Corp. has confirmed that it is in talks with CMGI about the sale of its Web properties.

A source close to the deal said both CMGI (Nasdaq:CMGI) and Compaq (NYSE:CPQ) were holding board meetings today to discuss the deal. If they approve it, it could be announced today.

Compaq today issued a statement saying it was holding "preliminary talks" regarding CMGI acquiring an interest in Alta Vista. The companies also said that they were considering establsihing a "strategic relationship" between the two firms to enhance Compaq's Internet operations. Officials would not comment beyond the press release, and said they would not issue any more statements until they had reached a definitive agreement.

Compaq had annoucned plans to spin off Alta Vista earlier this year. But while it has made some invstments in the Internet company -- acquiring Shopping.com, an e-tailing site, and Zip2, a city guide developer -- it has been slow to make any major enhancements to the site. A revamp is planned for later this year, however.

Wide implications
If the deal does occur, it has wider implications than just these two companies. For instance, AltaVista's advertising is handled by DoubleClick. But CMGI owns AdSmart, and that company would be very likely to replace DoubleClick when its current contract with AltaVista runs out.

The implications for DoubleClick are significant, since AltaVista provides a significant portion of its revenues.

Another company that could be hurt is LookSmart. LookSmart provides category-based searches for AltaVista, but CMGI owns Planet Direct, which offers a similar product and would ultimately be likely to replace LookSmart.

The deal would give CMGI, which already owns a host of Internet firms, a stake in one of the top ten sites on the Web. Alta Vista has always been better known for its search technology than for its status as a portal, however.

CMGI would almost certainly replace current AltaVista head Rod Schrock, the source said. The replacement would probably be someone internal, he said, noting that "CMGI has hired a lot of Internet talent."

The source said that buying AltaVista would not kill any CMGI deal to buy Lycos Inc. Reports today said that talks between those two companies have stalled because of conflcits between the two CEOs.

ZDNN's Margaret Kane contributed to this story.