RealTime IT News

CMGI Acquires 83 Percent of AltaVista for $2.3 Billion

Following days of rumors and confirmation by the companies last week of discussions, CMGI Inc. Tuesday purchased 83 percent of search engine AltaVista from Compaq Computer Corp. for $2.3 billion in cash and stock.

The deal will make Compaq CMGI's largest outside shareholder with a 16.4 percent stake. AltaVista will give CMGI a well-known property to anchor its 40 Internet companies, which include Furniture.com, investing discussion site Raging Bull and health site MotherNature.com.

Compaq will transfer 83 percent of AltaVista to CMGI in return for 19 million CMGI common shares and 1.8 million preferred shares. CMGI will also issue a $220 million three-year note to Compaq. Compaq will get a seat on CMGI's board.

In addition to the AltaVista search engine, the deal will include Shopping.com and Zip2.

Compaq will also become CMGI's strategic IT partner. Compaq computers will come preloaded with browser bookmarks and keyboard shortcuts that will direct users to AltaVista and other CMGI properties. CMGI will also work with Compaq's research scientists on next-generation Internet appliances and solutions.

"Our partnership will define and lead the consumer and enterprise market, from PC to Web, by combining Compaq's consumer Internet PC, commercial computing and infrastructure leadership, global reach and worldwide consumer base with CMGI's network of leading Internet technologies and destinations," said David Wetherell, CMGI's chairman and chief executive officer.

Rod Schrock will remain president and chief executive officer of AltaVista.

One possible loser in the deal is ad network DoubleClick Inc.. That company's shares have tumbled in recent days as the deal turned from rumor to near reality.

Speculation is that CMGI would switch AltaVista's ad solutions from DoubleClick to its own Adsmart or Engage once the current contract expires. Currently, AltaVista accounts for about 30 percent of DoubleClick's revenues.

Just after the deal was announced, DoubleClick (DCLK) shares had sunk more than $2.