AltaVista: Numbers May Never Add Up to An IPO

Like a coddled prizefighter continually steered out of harm’s way by doubtful managers, AltaVista once again has found a reason not to step into the IPO ring.

But just as ducking the big fight one too many times can cost a boxer his carefully crafted aura of invincibility, AltaVista’s false starts toward the IPO launch pad may be turning off many once-enthusiastic investors.

At best, Internet investors will cast a newly critical eye toward AltaVista and its business model. With strong branding no longer deemed a guarantor of market success, and with profits suddenly relevant in the formerly weightless world of Internet stocks (don’t you just hate it when that happens?), it will be a challenge for AltaVista and its underwriters to stoke strong enough demand for a moonshot when – and if – there is a public offering.

Hard as it is to believe, AltaVista first announced IPO plans way back in August 1996, when it was the most popular search engine on the Web. After months of delays, the IPO finally was shelved in June 1997. Market conditions were cited as the cause of the postponement, but there also reportedly were strategy differences between then-owner Digital Equipment and AltaVista CEO Ilene Lang.

A year later Digital was bought by Compaq Computer, which announced in January 1999 plans to spin off an AltaVista IPO later in the year. But by then, AltaVista’s position in the marketplace was eroding because other search engines such as Yahoo (YHOO) and Lycos (LCOS) had reinvented themselves as fuller-service Internet portals, while search sites such as Northern Light and were delivering better search results.

Things began looking up for AltaVista last June when Web-savvy CMGI (CMGI) purchased an 83 percent share in the company for $2.3 billion. In late September, CMGI CEO David Wetherell said AltaVista would file for an IPO in October, with tentative plans for a ticker debut in January.

The company didn’t get around to filing its S-1 until mid-December. The IPO, of course, didn’t happen in January, or early April.

Now, without the benefit of unbridled enthusiasm, AltaVista stands not as a premier portal, but as a tarnished Web property that isn’t in the same league as America Online (AOL), Yahoo or Microsoft’s MSN. AltaVista sites in February fell out of the Media Metrix (MMXI) list of 10 most-visited digital properties, with traffic down 8 percent from January.

Worse, AltaVista is a money drain. Losses in the fourth quarter (ended Jan. 31) alone were $272 million, against revenue of $50.9 million. That’s down from $52.6 million in revenue for the previous quarter, primarily because the company switched its e-commerce strategy, de-emphasizing product sales while increasing shopping services, for which AltaVista gets a commission.

Those kinds of numbers are a tough sell these days, and it’s not likely to get any easier, even with the backing of heavyweights CMGI and lead underwriter Morgan Stanley. Unless the figures change dramatically, there likely won’t be an AltaVista IPO. Ever.

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