Dateline: SAN FRANCISCOAdvertising-driven search engine Overture Services Inc. said it will buy fallen Internet star AltaVista for $140 million, upping the stakes in a quest for search engine supremacy.
Pasadena-based Overture said Tuesday that it will pay $60 million in cash and $80 million in stock for Palo Alto-based AltaVista, which introduced a pioneering search engine in 1995.
AltaVista fell out of favor, though, after it expanded to duplicate Yahoo's smorgasbord of online services, opening the door for search engine upstarts like Google to establish themselves.
By the time AltaVista reversed course and returned to its search roots, its business was sinking in financial quicksand.
AltaVista's sales price reflects the depths of the company's downfall. AltaVista was valued at nearly $3 billion in August 1999 when Andover, Massachusetts-based CMGI Inc. bought its 81.5 percent stake in the company.
By January 2000, AltaVista had amassed $765 million in losses, according to a Securities and Exchange Commission filing for an initial public offering of stock that never happened.
Overture is counting on AltaVista's technology to complement its main ad-driven search engine, which produces its results on how much businesses are willing to pay for a prominent ranking.
But the acquisition poses some risk for Overture.
Without providing specifics, Overture executives said the takeover will hurt the company's earnings this year before helping to increase profits next year.
This year's earnings downside appeared to spook investors Tuesday. Overture's shares rose 80 cents to close at $22.79 on the Nasdaq Stock Market before the AltaVista announcement, then dropped $1.89 in extended trading.
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On The Net:
http://www.overture.com
http://www.altavista.com
http://www.google.com
http://www.yahoo.com
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