CMGI sets its sights on AltaVista
A deal could be announced as early as Thursday, according to people familiar with the situation, though talks could still break down.
Such an acquisition could significantly bolster CMGi (Nasdaq:CMGI), helping the Internet investment company transform itself into a major Internet media outlet with a powerful Web presence. AltaVista would give CMGi a brand-name Web site, which it could use to anchor its 40 or so Web properties, helping it battle rivals, including Yahoo! Inc. (Nasdaq:YHOO).
For Compaq, Houston, selling AltaVista (www.altavista.com) and other Web properties would be a surprising about-face. Earlier this year, Compaq said it would spin off AltaVista in an initial public offering.
E-commerce strategy lagged
But despite its announced intentions for AltaVista, Compaq (NYSE:CPQ), the world's largest maker of personal computers, has been slow to pull together an e-commerce strategy. While competitors have developed Internet software and focus, Compaq picked up AltaVista through its purchase of Digital Equipment Corp. a year ago and only recently acquired its other properties and created a separate Internet subsidiary. That unit's possible sale suggests that Compaq Chairman Ben Rosen now wants to keep the company's focus on selling computer hardware and services.
Indeed, the possible sale of AltaVista comes amid big upheaval at Compaq. Compaq is losing money, and its sales are flattening. The company has been searching for a new chief executive since dismissing longtime CEO Eckhard Pfeiffer in April.
Amid rumors of a possible deal, CMGi dropped $8.0625 to close at $94.9375 in Nasdaq Stock Market trading. Meanwhile, on the New York Stock Exchange, Compaq jumped $1.6875 to close at $23.8125.
One person close to the matter also said that CMGi remains interested in a possible purchase of Lycos Inc. (Nasdaq:LCOS)
CMGi owns an 18% stake in Lycos, the No. 2 Web portal, and has been holding talks with Lycos over the past several weeks. This person says an AltaVista deal would not preclude a future Lycos purchase.
Deal would include AltaVista
A deal with Compaq, if completed, would give CMGi the AltaVista search engine, currently one of the top 10 sites on the Internet, as well as Shopping.com, an e-commerce site, and Zip2.com, which offers local content, say people familiar with the matter. The three companies are projected to record about $250 million in sales this year but are not profitable, these people say.
Officials from CMGi, Andover, Mass., declined to comment. Compaq said it couldn't comment on rumors or speculation. Officials from Lycos, Waltham, Mass., didn't return calls.
CMGi has reaped billions of dollars from early investments in hot Internet companies including Lycos and GeoCities. But its Web presence is relatively small, as none of the sites it controls outright are household names. CMGi, which reported sales for the first nine months of $120 million, commands a stock market valuation of about $9 billion.
Although AltaVista commands a huge presence on the Web because of its ability to conduct fast and thorough searches, the site has languished in recent years as rivals including Yahoo and Lycos have been quicker to build themselves into portals, which include shopping, weather and news.
AltaVista is planning a total relaunch of its site at the end of this month, one person familiar with the plans says. The new site will include a focus on local portals and an updated store that sells everything from computers to grills. The site also adds audio and video searches to AltaVista's search capabilities, this person says.
--Evan Ramstad contributed to this article.