Overture to Buy Web Search Firm AltaVista
Overture Services Inc. announced a surprise deal Tuesday to acquire the pioneering Internet search firm AltaVista Co. for $140 million -- a fraction of the $2.3 billion the company fetched in 1999 at the height of the dot-com boom.
Pasadena-based Overture allows companies to buy favored placement in Internet search results, and it plans to incorporate AltaVista’s patented search technology into its products, Chief Executive Ted Meisel said. Overture also plans to use AltaVista’s Web site as a test bed for new search technologies, he said.
The deal calls for Overture to pay AltaVista’s majority owner, Andover, Mass.-based Internet investment firm CMGI Inc., $60 million in cash and $80 million in stock, plus the assumption of some liabilities. Palo Alto-based AltaVista was the most prominent company in CMGI’s portfolio, but executives decided to jettison the company because it didn’t fit into its efforts to become profitable by focusing on a small number of businesses that can dominate their markets, CMGI Chief Executive George McMillan said.
His assessment reflects AltaVista’s precipitous decline from the top echelon of the Web, where it once stood with such rivals as Yahoo Inc. As of last month, it ranked 17th among search sites, Web gateways and online communities, according to research group Nielsen/Net Ratings.
Overture shares, which rose 80 cents to $22.79 in regular Nasdaq trading, dropped to $20.90 in after-hours trading after news of the deal. CMGI shares, which gained 5 cents to 83 cents on Nasdaq, jumped above $1 in after-hours trading.
The deal, which is expected to close in April, is subject to review by federal antitrust authorities.
AltaVista holds 58 patents, including ones covering Web indexing and “crawling,” the automated process of searching for material on the Web. Overture plans to offer products based on AltaVista’s searching capabilities and its “paid inclusion” model, which enables Web sites to guarantee that they will be included in search results by paying a fee.
Overture’s two biggest customers are Yahoo and Microsoft Corp.’s MSN, which vie with AltaVista for traffic. Nevertheless, Meisel said he didn’t think the acquisition put Overture in a position of competing with its customers. He added that Internet searching is “a very young industry and a very young product” with a lot of room left for innovation.
Overture plans to keep AltaVista’s site running because “we needed a place for us to test our ideas more fully ... to deliver sound results to our partners,” he said.
In an effort to claw its way into a profitable niche, AltaVista has donned various identities: It has been a search service, a shopping channel, an information provider and has made a bid to become an Internet service provider.
Eventually, AltaVista no longer could ignore its souring fortunes, and the company began shedding jobs nearly as quickly as CMGI’s stock price dropped from a high of $147 in March 2000. In 2001, AltaVista went through three rounds of layoffs, shrinking from 950 workers to less than 400 in the span of a year. The company slashed nearly its entire Irvine office, which housed the company’s failed online comparison-shopping service as well as some general and administrative functions.
AltaVista’s staff is down to 250. A spokesman for Overture said the company has no specific plans for the AltaVista employees, but he added that “their tech team in particular is a very important part” of the deal.
