January 10, 2001 4:15 PM PST

AltaVista cancels proposed IPO

Web portal AltaVista pulled plans for an initial public offering Wednesday, citing poor market conditions, according to a filing with the Securities and Exchange Commission.

The company, majority-owned by Internet investment company CMGI, filed to raise close to $300 million in December 1999 during the height of the Internet boom.

The company postponed its IPO in April 2000 after the drop in the Nasdaq Stock Market. It had planned to sell 14.8 million shares at a range of $18 to $20.

In its SEC filing, AltaVista said it is pulling its IPO because of "continuing unfavorable conditions in the financial markets."

AltaVista has struggled in recent months as the market for Internet advertising has slowed. The company initiated two rounds of layoffs in May and September in attempts to cut costs and speed its path to profitability.

CMGI has been affected by AltaVista's troubles. CMGI chief executive David Wetherell was among executives who lost the most wealth in 2000. Wetherell's CMGI shares fell from a value of $2.1 billion at the beginning of the year to $100 million at year's end, a 95 percent decline.

In light of the rough year for CMGI and AltaVista, analysts were not surprised to see the company withdraw its IPO.

"That's the exact market that investors have been shying away from, especially in light of reports from Yahoo today that there is slowed growth for the future of Internet advertising," said Paul Bard, an analyst with Renaissance Capital.

Yahoo, a rival to AltaVista, met its earnings projections Wednesday but sharply reduced its projections for 2001, suggesting continued depression in the online advertising sector.

"The guidance speaks very poorly about the future of the online advertising industry," said Frederick Moran, an analyst with Jefferies. "If the leading company in the Internet advertising arena, with leading viewership, will see a flattening out of growth because of the dot-com bust and economic slowdown, than you can bet the less well-established Internet players will see a major pullback in their growth rates."

 

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