Compaq Board Weighs AltaVista Deal

Compaq Computer’s board considered a proposal Thursday from Internet conglomerate CMGI that would give CMGI majority control of Compaq’s AltaVista Internet search engine but made no final decision.

The two companies denied earlier reports that an outright sale of AltaVista was on the table, saying instead that the arrangement might call on CMGI to lend Compaq some of its considerable Internet expertise.

That brought a sigh of relief from analysts and investors who had endorsed efforts by the No. 1 personal computer maker to turn itself into a more Internet-oriented company.

“It’s imperative for Compaq to maintain a majority stake in Alta- Vista,” said analyst Ashok Kumar of U.S. Bancorp Piper Jaffray.

Kumar said that without an outright sale of AltaVista, Compaq could find a way to benefit by adding links on the search engine to advertising on some of CMGI’s Web properties.

“With [CMGI’s] portfolio, I’m sure they could work in a backdoor,” said Kumar, who estimates AltaVista’s value at $3.4 billion.

Compaq could also end up with a minority stake in CMGI itself. Gateway, a computer direct seller that competes with Compaq, invested $200 million in CMGI last month.

People familiar with the negotiations said the talks are still quite fluid and are unlikely to result in a deal before next week.

For CMGI, a search engine would glue together its minority and majority stakes in Internet companies.

CMGI helped found Lycos, a rival Internet portal to AltaVista, and still holds a minority stake in that company. But this spring, CMGI head David Wetherell reversed his support for a Lycos merger with USA Networks, essentially killing that deal.

Compaq acquired AltaVista when it bought Digital Equipment Corp. last year.

Compaq shares fell 75 cents to $22.69 in New York Stock Exchange trading Thursday. CMGI fell $2.44 to $96.50 on Nasdaq.