Compaq Buys Software Firm Zip2

From Reuters

Compaq Computer Corp. said Tuesday that it acquired Zip2 Corp., a supplier of software used by a variety of leading U.S. newspapers to create local Internet media and electronic-commerce sites.

The deal is the latest move by Compaq to remake its AltaVista search engine into a top Web media and shopping site and follows its successful tender offer for shares of online retailer Inc., also announced Tuesday.

Houston-based Compaq said it plans to combine Zip2’s software with AltaVista’s Web search and electronic-commerce technologies to extend the revenue potential of Zip2’s local news media and e-commerce partners. Mountain View, Calif.-based Zip2 is privately held.

The deal will give users of AltaVista, which is among the top 10 most visited sites on the Internet, access to a range of local media and e-commerce links running on Zip2 sites in 160 cities, including the top 50 U.S. metropolitan regions.

AltaVista Chief Executive Rod Schrock said the Zip2 acquisition adds local programming breadth to AltaVista’s Web search, electronic mail, online discussion boards and electronic-commerce features.


Zip2 will become an operating unit of AltaVista, a wholly owned unit of Compaq located in the adjacent Silicon Valley city of Palo Alto. Compaq has said it hopes to spin off AltaVista as a separately traded company this year.

The company said Zip2’s board of directors, which includes representatives of several prominent newspaper companies, had unanimously approved the deal, which involves a cash purchase of all of Zip2’s outstanding shares.

Financial terms were not disclosed, but Schrock said Compaq would spend more for the acquisition than the $220 million it agreed to pay to acquire

Media companies using the Zip2 system to run their online sites include Times Mirror Co., parent of the Los Angeles Times.

The combination pits AltaVista against other full-service Internet media and commerce leaders such as America Online Inc., Yahoo Inc. and Lycos Inc. in the race to attract local Internet audiences.

Asked if AltaVista will provide direct Internet access to customers, Schrock said, “Not yet,” but added that it is developing plans in this direction.

Currently, Compaq resells Internet-access services to buyers of its home PCs, but most AltaVista visitors still use Internet connections from other service providers.

Compaq shares lost 19 cents to close at $42.81 on the New York Stock Exchange.