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Ask Jeeves in Deal to Expand Search

Ask Jeeves Inc. Tuesday bought search technology company Direct Hit Technologies Inc. for just under $507 million in stock.

Ask Jeeves (ASKJ) will exchange 5.12 million shares for all outstanding Direct Hit shares. In return, Ask Jeeves will acquire Direct Hit's automated search technology which includes a popularity engine that ranks Web sites. The deal has already been approved by both companies' boards and is expected to close by the end of the first quarter.

Direct Hit has a number of companies which use its technology in their own branded offerings, including About.com (BOUT), Infospace.com Inc. (INSP) and AT&T WorldNet.

Ask Jeeves plans to integrate Direct Hit's technology into its corporate service, used by a variety of companies to help reduce customer support costs.

Ask Jeeves President and Chief Executive Officer Rob Wrubel said the acquisition will allow the company to pursue a variety of business-to-business opportunities.

"The technology we gain through this acquisition will allow us to combine human insight with advanced automated technology that can be scaled and implemented on company Web sites across the Internet. Now we can offer corporations an automated, intelligent service driven by customer preferences...," he said.

Carolyn Trabuco, an analyst at First Union Securities, called the deal "a natural fit."

"The whole Ask Jeeves solution on the consumer side is geared to answer the 20 percent of questions asked 80 percent of the time. Jeeves is not designed to be an encyclopedia.

"The Direct Hit acquisition supports the 80/20 rule. It not only gives you the questions asked most of the time, but the types of solutions people are seeking," she said.

Trabuco has a strong buy rating on the stock and a 52-week target of $230.