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Ask Jeeves Makes $343 Million Acquisition

In a staggering $343 million deal, Ask Jeeves has agreed to acquire privately held Interactive Search Holdings.

The deal will bring a number of popular sites and search services, including iWon and Excite, into the search company's domain.

"The acquisition of Interactive Search Holdings will be an important step in Ask Jeeves' growth strategy," said Ask Jeeves CEO Steve Berkowitz. "This acquisition will double our market share, enhance our ability to compete in the fast-growing search market, and is expected to increase the financial returns to our shareholders."

In October 2003, Ask Jeeves was ranked number 28 in overall traffic by comScore Media Metrix, while the Excite Network (consisting of Interactive Search's Excite and iWon properties) held the number nine spot. Interactive Search had approximately 700 million searches in the fourth quarter. This compares to 680 million searches on Ask Jeeves' proprietary sites during the same period.

Berkowitz said the company would benefit from Interactive Search's strengths in distribution and direct marketing. He hopes the company will continue to be perceived as search-centric as it was before the acquisition, although the move branches its holdings into ad representation.

"We'll have multiple brands that will offer users different search experiences through search only Web sites, search-focused portals and search-centric downloadable apps," Berkowitz said. "This will allow us to reach more users through multiple access points."

Though Ask Jeeves puts its emphasis squarely on search, the acquisition of certain Interactive Search properties, in particular the portal My Way, certainly positions it for possible growth into extra-search capabilities and even a portal-like online identity.

"It definitely strengthens their position as a tier two player; and it makes them more of a destination, because with MyWay they have things like e-mail," said Gary Stein, a senior analyst with Jupiter Research. "It's another tick towards potential personalization down the road."

For now that won't happen, however, as Berkowitz said Ask Jeeves intends to leave the company and its holdings alone. Until further notice, he said the synergies between Ask Jeeves and its new subsidiary will mainly be reflected in the marketing of the company to advertisers.

"Our strategy is building around user need. The synergies are going to come in how we market, in how we develop products, in the way we approach the business, and the way we approach the advertisers," he said.

Interactive Search's businesses and online properties include My Way, My Search, My Web Search, iWon, Excite and the MaxOnline advertising network. The company says it's been pushing the search side of its operations for some time, and joining Ask Jeeves' portfolio will advance that goal.

After the deal goes through, Interactive Search will continue to operate out of Irvington, New York as a wholly owned subsidiary of Ask Jeeves, the companies said. Its executives have all agreed to stay on with the company, though Berkowitz declined to specify the length of their contracts.

Under the deal, Ask Jeeves will issue 9.3 million shares of common stock and options and pay $150 million in cash. The search company may also pay an additional $17.5 million if the subsidiary performs well.

The search company said it expects an immediate boost in revenue to result from the deal. For 2004, Ask Jeeves now anticipates revenues of $148 million, up $6 million over its projections.