CMGi buys AltaVista from Compaq for $2.3 billion.

I Find Karma (
Tue, 29 Jun 1999 17:36:49 -0700 (PDT)

My love affair with CMGi continues as CMGi trades 15% of itself to
Compaq in exchange for 83% of AltaVista... it's nice, because AltaVista
was just languishing at Compaq (whereas CMGi will help turn it into a
real business), and now the world's largest PC maker is giving CMGi the
"Internet buttons" on their keyboards and desktops. Too bad CMGi
couldn't get Compaq to sell them the Alpha division too, I'm sure they
would have let the Alpha fly.

No mention is made of whether CMGi got Millicent in the deal (!?), but
they did get and ... I should note that CMGi now
owns portions of Amazon, Yahoo, Lycos, and AltaVista, as well as all of
an in-house portal ( and all or part of 40 other
Internet companies. The Berkshire Hathaway of the Internet age? Perhaps...

[Completely unrelated: Rohit, are you watching HSAC? Trading in the
Internet sector went nuts again today. Apparently no one gives a flying
boink what the Fed decides to do... the mania lives on :]

Here's the release from the CMGI site:

> Compaq and CMGI Form Strategic Internet Partnership; CMGI Acquires
> AltaVista Team to Deliver End-to-End Technologies And Enterprise
> Solutions; Partnership to Define Future of Consumer Internet PC Market
> Editor's Summary:
> CMGI takes majority stake in AltaVista; Compaq to be CMGI's largest
> outside shareholder
> CMGI's Internet leadership and resources to accelerate AltaVista's move
> to world-leading portal network
> Compaq named a premier IT partner to CMGI; CMGI to be a premier Internet
> technology and solutions supplier to Compaq
> CMGI to collaborate with Compaq's world-class research labs and business
> groups to develop and rapidly deploy next-generation Internet
> technologies
> HOUSTON, TX and ANDOVER, MA mpany, today announced a comprehensive
> strategic partnership that will enable both companies to aggressively
> pursue Internet-related business and market opportunities.
> The strategic partnership is aimed at providing the best Internet
> services and solutions to both businesses and consumers. The two
> companies will drive the Internet PC market by combining Compaq's
> consumer PC leadership with CMGI's network of leading Internet
> destinations and enabling technologies. CMGI will acquire control of
> Compaq's AltaVista business and its related properties ( and
> Zip2) and will integrate the popular AltaVista search engine into its
> network of 40 leading Internet operating companies to deliver a superior
> online experience to Internet users both at home and at work.
> "Our partnership will define and lead the consumer and enterprise
> market, from PC to web, by combining Compaq's consumer Internet PC,
> commercial computing and infrastructure leadership, global reach and
> worldwide customer base with CMGI's network of leading Internet
> technologies and destinations," said Dave Wetherell, CMGI Chairman and
> CEO.
> "CMGI has established itself as a clear leader in the Internet economy,"
> added Benjamin M. Rosen, Compaq Chairman and acting CEO. "And as CMGI's
> largest outside shareholder and its principal strategic partner, we look
> forward to mutually driving future Internet opportunities for the
> benefit of the Internet marketplace, our respective shareholders,
> customers and employees."
> Under the terms of a definitive agreement, Compaq will transfer 83.0
> percent equity ownership in the AltaVista business to CMGI. Compaq will
> retain 17.0 percent equity ownership in the AltaVista business and hold
> a Board seat. In return, Compaq will receive 19.0 million CMGI common
> shares and CMGI preferred shares equivalent to 1.8 million CMGI common
> shares, which combined, would represent a 16.4% fully diluted equity
> stake in CMGI. In addition, CMGI will issue a $220 million three-year
> note to Compaq, bringing total consideration for CMGI's 83% ownership in
> the AltaVista business to approximately $2.3 billion, implying a total
> value of $2.7 billion for AltaVista. Compaq will also take a seat on the
> CMGI Board of Directors and plans to announce the appointment to this
> new position in the coming months. The agreement, subject to normal
> regulatory approvals, is binding on both parties and does not require
> shareholder approval for the closing.
> Global Business and Customer Benefits
> The partnership between CMGI and Compaq will expand the range of both
> companies' Internet business capabilities.
> Under the agreement, CMGI designates Compaq as its strategic IT partner,
> enabling CMGI, its Internet companies and their customers to benefit
> from Compaq's global leadership in consumer products, PC products, and
> enterprise-class systems, solutions and services.
> Compaq plans to integrate the diverse Internet capabilities of CMGI's
> pure-play network of 40 Internet companies into its consumer Presariob
> Internet PCs, commercial PC and enterprise-class solutions offerings.
> This integration includes web browser and keyboard access to the
> AltaVista Network and other CMGI Web services. Importantly, the alliance
> will enable Compaq and CMGI to offer Compaq's enterprise customers an
> array of business-to-business and business-to-consumer services to
> create customized vertical portals along with other comprehensive
> Internet solutions.
> With Compaq as its strategic IT partner, CMGI's network of businesses
> will be able to take advantage of Compaq's NonStopb eBusiness solutions.
> This will ensure that the IT systems fundamental to their success will
> maintain uninterrupted operations with complete data integrity and
> unlimited scalability, supporting continual growth and
> ease-of-management.
> CMGI will also collaborate with Compaq's world-class research labs and
> business groups to develop innovative, high-value Internet technologies
> and next-generation Internet appliances, and will foster business
> opportunities to exploit them.
> Building World-Leading Network with AltaVista
> CMGI, Compaq and the AltaVista management team - headed by Rod Schrock -
> will work together to establish AltaVista as one of the world's leading
> Internet networks. AltaVista will integrate services from CMGI Internet
> companies to create a premier Internet network for both on-line
> consumers and Web-based businesses.
> Yesterday, AltaVista announced several new services that form the
> foundation of a premier media and commerce network. These include an
> updated search site, the world's first microportal service, 42 local
> community portal partners, and redefining as the
> ultra-satisfying place to shop.
> "We believe in the power of the Internet and in the power of leading
> portals to capture and retain users," added Wetherell. "The integration
> of AltaVista services with CMGI's extensive network of best-of-breed
> Internet operating companies will create a formidable network. We see
> enormous opportunity ahead as we execute on the dynamic potential of our
> synergies."
> "CMGI's Internet leadership will greatly accelerate the AltaVista
> strategy announced just yesterday," said Rod Schrock, president and CEO
> of AltaVista Company. "By combining AltaVista services with CMGI's
> extensive network of community, infrastructure and e-commerce Internet
> companies, there is no limit to our long term potential."
> Compaq Background
> Compaq Computer Corporation, a Fortune Global 100 company, is the
> second-largest computer company in the world and the largest global
> supplier of computer systems. Compaq develops and markets hardware,
> software, solutions, and services, including industry-leading enterprise
> computing solutions, fault-tolerant business-critical solutions,
> enterprise and network storage solutions, commercial desktop and
> portable products and consumer PCs. The Company is an industry leader in
> environmentally friendly programs and business practices.
> Compaq products are sold and supported in more than 100 countries
> through a network of authorized Compaq marketing partners. Customer
> support and information about Compaq and its products are available at
> CMGI Background
> A recognized leader in the Internet economy, CMGI (Nasdaq: CMGI) has
> built a substantial base of Internet operating companies and, through
> its @Ventures affiliates, has invested in a growing portfolio of
> synergistic Internet enterprises which enhance the value of its core
> holding. This unique method of generating equity for its shareholders is
> what CMGI calls "creating net value." Microsoft, Intel and Sumitomo hold
> minority positions in CMGI.
> CMGI's majority-owned subsidiaries include Activerse, Adsmart, Engage,
> iCast, Magnitude Network, NaviSite, NaviNet, Planet Direct and ZineZone.
> The Company's @Ventures affiliates have ownership interests in Lycos,
> Inc. (Nasdaq: LCOS), Critical Path (Nasdaq: CPTH), Silknet (Nasdaq:
> SILK),, Asimba, blaxxun,,,
> Chemdex,,, HotLinks,,
> ONElist, Productopia,, Raging Bull, Softway Systems, Speech
> Machines,, Universal Learning Technology, Vicinity,
> Virtual Ink and Visto.
> CMGI is also the majority-owner of SalesLink, InSolutions and On-Demand
> Solutions, leaders in direct marketing, fulfillment and turnkey arenas.
> CMGI Corporate headquarters is located at 100 Brickstone Square,
> Andover, MA 01810. Telephone: 978-684-3600. Fax: 978-684-3814.
> Additional information is available on the company's Web site at
> AltaVista Background
> Launched in 1995, AltaVista is a pioneer in Web search technology and
> continues to set new standards, from indexing the entire Internet, to
> providing the first of their kind language translation, AltaVista Photo
> & Media Finder and AltaVista Family Filter search capabilities. With an
> extensive line-up of content and services, AltaVista is now regarded as
> one of the top destinations on the Internet.
> AltaVista continues to build upon its heritage through extensive
> enhancements and industry-leading partnerships to make the Internet
> relevant, fast and effective for Web users of all proficiency levels.
> For more information, visit AltaVista's flagship site at
> or

Here's the interview with the chairmen of CMGi and Compaq on CNBC...

> JUNE 29, 1999
> SUMMARY: Rosen says CPQ is selling AltaVista in an effort to
> differentiate the company's Internet holdings. Wetherell plans to
> integrate AltaVista before strategizing an IPO for the portal.
> Maria: After weeks of speculation, Compaq computer announced this
> morning it is selling control of its AltaVista search engine operations
> to the Internet company CMGI. Compaq will become CMGI's biggest
> shareholder after the company's Chairman and CEO, David Wetherell. Both
> stocks are trading higher today on the news. Joining us now from New
> York are CMGI's Chairman and CEO, David Wetherell. And Compaq's Chairman
> and Acting CEO, Benjamin Rosen. And joining me here in the studio, Steve
> Frank of "The Wall Street Journal," who has been reporting on this
> story. Welcome congratulations on your deal.
> Thank you very much. Maria: Let me ask you, Mr. Rosen, why would you be
> selling AltaVista at a time when most people believe that it is the
> Internet strategy which your company must define at a time when PC
> business has come under some pressure?
> We are not selling AltaVista. What we are doing is trading 100%
> ownership of one Internet company for a significant ownership in a
> portfolio of over 40 Internet companies that really is part of our
> Internet strategy. It greatly broadens our reach and breadth in the
> Internet area.
> Maria: And what is the Internet strategy?
> Our plan is to be one of the leading Internet companies of the future.
> This combines with our nonstop e-business strategy in the enterprise
> area that will give us the highest performance group of solutions in the
> Internet area.
> Steve: David, it's Steve Frank. I wanted to ask you a question on
> pricing. You haven't disclosed officially AltaVista's revenues, but sort
> of hinted they're in the range of about $160 million annually. And that
> would suggest you're valuing the company right now at about 17 times
> current fiscal year revenues. That compares to about 31 times revenues
> for Lycos, or at least where Lycos is trading right now. Does that
> suggest you got a real bargain on AltaVista or does that suggest to you
> that Lycos is overvalued?
> Well, it doesn't have to be one of or the other, of course. There are
> different ways of valuing companies and different metrics you need to
> look at. Lycos is closer to breakeven than AltaVista is. However, on the
> search engine part of the business, AltaVista looks to be profitable at
> this time and growing very quickly. The and Zip2 assets
> that we're acquiring here are earlier in their business evolution and
> are still experiencing reasonably heavy losses. We think that there's a
> great deal we can do to leverage up all those businesses and improve
> both the top and the bottom lines.
> Let me just follow up asking you about CMGI's relationship with Lycos,
> where you still own a pretty hefty stake, I think something on the order
> of something like 18%. You've announced that many of your CMGI-owned
> Internets companies are going to be rolled up or affiliated somehow with
> the AltaVista search engine here, integrated into the search engine.
> Does that suggest they will have a lesser role to play with Lycos or
> that CMGI's relationship with Lycos will somehow change?
> Not at all. These companies that are going to be integrated into the
> AltaVista portal are still going to remain a stand-alone business unit.
> And free to collaborate with other portals and a couple of them their
> own portals in their own vertical niches and in the case of
> and Raging Bull, the second-largest financial community on the Web. And
> we have some broad more general interest portals that will also remain
> as independent business units and have every opportunity to collaborate
> with Lycos where possible.
> Maria: Mr. Rosen, this, of course, one more change, a lot of changes
> ahead of naming a new CEO. Where does your search for the CEO stand at
> this point?
> The search is doing very well. We don't comment publicly on it other
> than to say that we are on our schedule to find our permanent CEO.
> Maria: And are you looking specifically within technology?
> We're looking at both, within and outside technology.
> Maria: With respect to the shift in revenues that we have been seeing
> within the PC area, within the PC industry, where some companies are
> trying to bundle Internet access. Along with selling a PC and perhaps at
> some point selling a PC at somewhat of a discount to get the person to
> buy into Internet access. Does that create an opportunity for Compaq to
> look for new sources of revenue, perhaps on the service area or the fee
> side?
> Absolutely. We're looking at a variety of means of deriving recurring
> revenues from our PC sales in both our consumer as well as our
> commercial PCs. And I think this relationship we're announcing today
> with CMGI, it's a strategic relationship that will offer a variety of
> new services that will benefit both us and CMGI.
> Steve: Mr. Rosen, it's Steve Frank. There's been some speculation,
> getting back to the issue of the CEO search, that by making all these
> decisions, by making the decision with regard to Compaq's recently
> announced restructure, by making this decision on Internet strategy,
> that you're complicating that search by taking away many of these
> decisions from a perspective new CEO. Do you feel that's the case? And
> assuming you don't, how active a role do you foresee yourself playing
> once a new CEO is named?
> What we are doing are taking the steps that are necessary to make Compaq
> a stronger growing and more profitable company. We live in Internet
> speed today. And you can't waste a day where there's an opportunity. So,
> we've taken the steps that are necessary to get us growing and
> profitable again, steps that will make it easier for the new CEO when he
> or she comes in, not more difficult. And my role is to do what I've done
> for the last 16 years, except for the last 10 weeks, and that is to
> disappear into the woodwork as non-executive chairman.
> Steve: Okay. Let me ask you another question, Mr. Rosen, related to your
> newfound stake in CMGI. At what point do you see yourself unlocking the
> value that you've now gained by selling those shares?
> Well, we have no current plans to sell the shares. We cannot sell any
> shares in the first year. And then it's a percentage thereafter, but
> right now we're very happy to be shareholders.
> Steve: Well, if that's the case, why the need for a lock-up agreement
> that allows you to sell those shares, half in a year and half in 18
> months?
> Well, I don't want to go into all the details of the agreement. Let me
> just say that we're very pleased to be a part of the largest outside
> shareholder of CMGI.
> Maria: Mr. Rosen, you have had difficult financial results ever since
> acquiring Digital. What value did that bring? And is that value still
> there?
> Digital and our previous acquisition, Tandem Computers, have provided us
> with all of the elements we needed to be a complete information
> technology to implement this nonstop E-business solution strategy. From
> Digital, we acquired 25,000 service people, we acquired AltaVista. We
> acquired the 64-bit alpha chip, a variety of products and services that
> we simply did not have and could not develop in a reasonable time.
> Steve: David, it's Steve Frank again. I wanted to ask you a quick
> question about your own Internet advertising companies that you own
> between Ad Smart and Engage, which together are considered rivals to
> DoubleClick, which obviously, has a big relationship with AltaVista,
> that I understand is under contract for another three years. What can
> you tell us about that relationship with DoubleClick? Do you expect to
> get out of it after three years? And secondarily, what can you tell us
> about CMGI's plans, ultimately, to take AltaVista public again?
> As far as DoubleClick's concerned, we have every intention of honoring
> the agreement that's in place. In looking to ways that we can extend the
> relationship that we have beyond AltaVista with DoubleClick. You talked
> about Engage in particular. There is the distinct possibility or
> opportunity to extend all that Engage has to offer to DoubleClick.
> Certainly, we expect to provide Engage profiling to the AltaVista set-up
> properties. We believe that that is something that would benefit all the
> other DoubleClick properties as well. We haven't had those meetings with
> DoubleClick at this time. So, it's not clear what the long-term
> relationship will be. As far as IPO opportunities, it is our business
> model to take companies public. When they are best ready, we're going to
> wait until we finish further along down the road of integrating all of
> the CMGI collection of properties into the AltaVista megaportal before
> we pick a day and strategize with the AltaVista management as to what
> the best time would be for an IPO.
> Maria: Gentlemen, once again our congratulations and we thank you for
> joining us.
> Thank you very much. Thank you.
> Maria: CMGI's David Wetherell and Compaq computer's Benjamin Rosen and
> our thanks to Steve Frank in the studio.


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