Compaq to Make Late Entry Into Web Portals
Compaq Computer’s announcement Tuesday that it would spin off its AltaVista Internet search service as an independent Web portal site may be a case of too little too late, industry experts said.
Compaq will try to ride the current Internet stock mania and deploy its vast assets as the largest maker of personal computers to boost AltaVista into the top ranks of mega-sites that combine search, shopping, e-mail and a wide range of entertainment and financial services. But analysts view the effort as an uphill battle given the head start enjoyed by Yahoo, Lycos and major portals owned fully or partially by America Online, Walt Disney, @Home and NBC.
“The window has closed on being one of the top destination sites on the Internet,” said Paul Gillin, editor of Computerworld, a trade magazine. AltaVista would do better, he said, to play to its strength--improving and marketing its highly regarded search technology “engine.”
Instead, Houston-based Compaq plans to raise funds for the Alta-Vista portal with an initial public stock offering.
“It’s important that we show we can deliver great services” before going public, said Rod Schrock, a Compaq senior vice president who was named chief executive of Palo Alto-based AltaVista Co.
Schrock acknowledged that an IPO may occur this year, given that Compaq has guaranteed funding for one year only. Compaq took ownership of AltaVista, a division of Digital Equipment Corp., when it acquired Digital last year.
Schrock said AltaVista already enjoys some key elements for success, including Shopping.com, a leading consumer site that Compaq recently agreed to acquire for $220 million. AltaVista will integrate search and buying services to boost online sales.
And keyboards sold with Compaq Presario PCs include a dedicated AltaVista button, with plans to extend the feature to other products.
The company also announced Tuesday that AltaVista will gain a self-branded version of Microsoft Corp.’s Hotmail e-mail product and will integrate instant-messaging services Microsoft is developing. The companies will jointly build Web-based community features. In return, Microsoft will obtain AltaVista’s search engine for the Microsoft Network, or MSN.
As a result of the agreement, San Mateo, Calif.-based Inktomi Corp. will be replaced as MSN’s search technology provider.
AltaVista will commit more than $50 million to market its brands, but Bill Bass, an analyst with Forrester Research in Boston, estimates that Disney will spend $250 million establishing its new Go.com portal. Even Monster.com, a specialized help-wanted site, will spend $25 million this year, he said.
Analysts predicted that AltaVista’s best survival strategy would be to go public soon, then be acquired by a media titan--such as Time Warner, CBS or Sony--that is known to be shopping for a major Web presence.
Inktomi shares fell $18.44 to close at $129.81 on Nasdaq; Compaq rose $2.56 to close at $49.25 on the NYSE.
