RealTime IT News

AltaVista: Late to the Party

In the old days (that is, four years ago), there were companies that were search engines. When this was not enough to pay the bills, these search engines became portals - suction cups that "monetize" huge traffic streams.

One of the oldest search engines is AltaVista. In fact, I was once a devoted user to it - but have since have gone elsewhere.

After much turmoil, AltaVista is going public. The price range is $18-20, the lead underwriter is Credit Suisse First Boston and the proposed ticker symbol is ALTA.

AltaVista was initially developed by Digital Equipment Corp. (DEC) and was one of the first modern Internet search engines to provide extensive coverage of the Web. In June 1998 Compaq acquired DEC and the AltaVista search engine with it. Compaq felt it was time that AltaVista become its own company. Then again, with the many problems with Compaq, a spin-off may mean a way to spruce up the stock price of Compaq (ala 3Com's spin-off of Palm). Then in June 1999, Compaq announced an agreement with CMGI Inc. whereby CMGI would acquire approximately 81.5% of AltaVista's equity ownership.

Even with the help of CMGI, the fact remains that competition is rife for portals. The list is endless: America Online, CNET, Direct Hit, Excite, the Go Network, Google, HotBot, Lycos, Microsoft Network and Yahoo!. Weren't we supposed to have only two or three portals by now?

To set itself apart, AltaVista has made quite a few acquisitions including Zip2, iAtlas, Raging Bull (affiliates of CMGI) and Transium Corp.

These acquisitions have allowed AltaVista to greatly expand their content. But the price has been staggering. In all, AltaVista has an accumulated deficit of $765.1 million.

Luckily for AltaVista their expanded business does compete in a lucrative market. Data from @Plan in the Fall of 1999 shows that the typical AltaVista user is a more frequent online user and more likely to buy products online than the typical Internet user. AltaVista's total revenues for the six months ended January 31, 2000, were $105.7 million.

AltaVista has their work cut out for them, though. The fact remains that the portal game is crowded and is really dominated by a few players, such as Yahoo! and AOL. In this environment, expect a tepid stock performance from AltaVista.