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Second Time Lucky:What's AltaVista Worth Now?

Tick tock, what's AltaVista worth? Nearly two-and-a-half years after originally filing for an IPO (and later canceling) AltaVista is once again back in the limelight, only this time as Compaq's offspring seeking another way to bring its value to the surface. But in a world of at least five search services and more vertical portals, can AltaVista find its value?

As we've done in WEBDEX each week we've been valuing AltaVista on a private market value basis for several years now.

During that time, privately valued assets have always been at a discount to their public peers for several reasons. First is capital leverage, ability to grow and use stock as currency.

That attracts talent which grows the company which (the theory goes) creates more value. Talent wants stock options. Not public? No talent very long. Basic Internet economics which AltaVista missed out on so far.

Let's look at AltaVista in this historical snapshot:

While Compaq has been juggling with AltaVista (or ignoring it) NBC rescued SNAP from CNET, Disney snapped up 43% of Infoseek for $430 million, and @Home made a stone's throw $6.7 billion bid for Excite(NASDAQ:XCIT).

Even smaller portal Go2Net (NASDAQ:GNET) began creeping into the larger arena with its buys of HyperMart and launching of WebMarket for shopping.

Circa 1996-97, AltaVista lost its Yahoo contract, Inktomi(NASDAQ:INKT) made pure search a commodity, and the search group en toto made haste to be AOL's of the Web.

Meanwhile, AltaVista became part of ("part" is probably too strong a word), rather AltaVista "tagged along"with Compaq's $9 billion acquisition of Digital (AltaVista'screator).

Fast forward to today and AltaVista may go IPO or sell a part of itself in order to free itself from the shadow of the PC Goliath,untether some value in stock, and incentivize its crew with options.

To its credit, AltaVista has produced a powerful search service, multi-lingual, and cleaned up the design in recent months to look more like a content hub.

Said another way, it got a wash and wax and now is on the lot where the other vehicles go for more than $1 billion on a bad day. Infoseek is closest in our view to AltaVista in users and possible valuation. The pre-Disney Infoseek that is.

Our analysis of AltaVista estimates that its IPO value (market value at IPO) could be $600 million to $650 million, or $60 to $65 per unique user.

On a post-IPO valuation basis we estimate AltaVista could fetch $1.3 billion to $1.5 billion in the aftermarket, based on it realizing the "user-trage" gap between the private and public entity and raising its profile on Wall Street as a contender.

We think the value may be there for the unfolding if AltaVista can get in gear as an "Internet" company apart from its two PC-era parents (Digital and Compaq).

The lingering question is how many search services (or flavors of vanilla) will advertisers support? SNAP, Infoseek and Excite have taken their exits, can AltaVista now make its entrance?