AltaVista Sale Would Spare Investors A Bad IPO

If you’re an investor who hates to see a promising opportunity botched,
or if you’re simply an Internet user who values a good search engine,
you should hope reports are true that CMGI may buy AltaVista from
Compaq.

CMGI, an Internet holding company and venture capital firm, reportedly
is mulling the purchase of AltaVista and other Internet properties from
the computer maker for $2 billion to $3 billion in stock. Insiders say
an announcement could come as early as Thursday.

Once regarded as the best search tool among serious Internet users,
AltaVista has been deteriorating in quality ever since Compaq bought its
ailing parent company, Digital Equipment Corp., last year.

Now Compaq itself is ailing. The leading global seller of personal
computers has been rocked by poor quarterly performances that ultimately
led to the ouster in April of CEO Eckhard Pfeiffer.

Back in February, Pfeiffer said Compaq was building up services and
functions on AltaVista with an eye toward a public offering later this
year.

On the surface, it sounds like a good move. AltaVista ranked 10th among
all Web properties in attracting visitors in May, and its name is
recognizable to even the most casual Internet user. For Internet
companies relying on advertising business models, traffic and branding
are indispensable assets.

But the rot has begun to set in, and an IPO would have focused investors
on the problems confronting AltaVista.

As a portal, AltaVista is not in the same league as sites such as
Yahoo!, Lycos, Go Network, GeoCities or Excite, all of which generate
much more traffic – three times as much in the cases of Yahoo! and
Lycos.

There’s a reason why: These sites offer users a vast array of timely
news, information and services. Go to AltaVista several days in a row
and there’s a good chance that the same stale headlines will be staring
you in the face. Does anyone update this site on a regular basis?

Well, you might say, AltaVista has never aspired to be a portal. It’s
bread-and-butter always has been its superior search services.

Not any more. Sites such as Google and Northern Light blow away AltaVista as search tools. It’s just a
matter of time before more people discover this and abandon AltaVista.

When Compaq spun off AltaVista early this year and began laying the
groundwork for an IPO, the company began packing the search engine’s
executive ranks with PC industry veterans who, in remarkably short
order, proved themselves inept in the Internet world.

Such is not the case with CMGI, which has proven itself adept at picking
and developing Internet winners. If the deal with Compaq goes through,
it will do the same for AltaVista. And then we could eventually see a worthy IPO.


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