AltaVista: Profits, Full Speed Ahead!

AltaVista Co. Friday, in an attempt to reposition itself to better compete with industry leader Yahoo! and attain profitability early next year, cut 25 percent of its workforce.

The company said it will de-emphasize its media portal activities in favor of its search engine. The company currently employs about 900 workers. Friday’s layoffs were the second round of cuts in five months.

“Together, these steps place AltaVista firmly in line with its “best-in-class” peers: AltaVista North America intends to be profitable, excluding amortization expenses, in the quarter ending January 31, 2001,” the company declared. “AltaVista is now in a strong position to invest aggressively in the high growth, high-margin search business.”

AltaVista new strategic roadmap includes:

  • Investment in the industry’s first Third Generation Search Service, which the company said would add an understanding of users’ interests, context and desired task at a global scale
  • Continued investment in vertical search indices like the company’s information service
  • Formation of a new Information-Marketing Services organization with the stated goal of dramatically growing revenue per page by offering in-context marketing services to content providers on search results — though the company said it would do this without compromising the objectivity of search results
  • Quadrupling the size of the AltaVista Search Software Enterprise sales and support organization by the end of the fiscal year, July 31, 2001
  • Expansion to more than 35 countries this fiscal year.

The first country targeted for expansion is Denmark, where AltaVista will launch its Denmark Search site next week. The company said the Danish language site will index more than 95 percent of all Danish sites.

“While many of these business decisions have been difficult, we are now in a position to unleash our search expertise with a clear, singular focus to penetrate every layer of the search market for both consumers and businesses,” said Rod Schrock, president and chief executive officer of AltaVista. “This strategy is true to our brand and creates a distinct leadership position for AltaVista on a global scale.”

In its quest to attain profitability, the company has taken a number of steps to streamline its costs. It is transitioning its strategic sales force from DoubleClick to AltaVista; has renegotiated rates for its ad-serving infrastructure; consolidated its California operations in Palo Alto; reorganized from four business divisions to a single organization; streamlined its operations costs by re-engineering its front end delivery platform; and created a new search index architecture that reduces platform cost per search query by 45 percent.

The restructuring is the company’s latest effort to reinvent itself in order to make up ground lost to companies like Yahoo! and America Online. The two companies have been continuing to pull away from the rest of the portal players. This may have led AltaVista to decide to retreat from competition in the portal arena and focus on the strength of its search engine offering.

AltaVista parent company CMGI Inc. is supporting the company’s move.

“CMGI is singularly focused on achieving leadership within our chosen lines of business,” said David Wetherell, chairman and chief executive officer of CMGI. “We’re confident that AltaVista’s decision to reinforce its strategic focus on search, in tandem with its investments to help increase market share and expedite its timeline to profitability, will significantly accelerate our goal to make AltaVista the leading search portal for both consumers and enterprises.”

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