April 9, 2002 6:25 AM PDT
HP, Overture ink search engine deal
Overture, formerly known as GoTo, will be the default link for the "Search the Internet" keyboard button on new HP Pavilion notebooks and PCs. It will also be the default search engine on the Internet browsers shipped with the computers and will be linked to through the "Search the Web" box on the browser's default home page.
Financial terms of the deal were not released.
The deal is a boon to Overture, which has been fighting a tough battle with search engine Google. Unlike many traditional search engines, Overture's allows advertisers to bid to get their listings placed in its results. The method has proved popular with some of Overture's partners, and the company recently renewed a string of partnerships with companies such as Yahoo and Microsoft.
"Overture has grown revenue and the number of advertisers in an environment where other Internet-based advertising companies have shrunk, primarily because of its low-risk, high-return, pay-for-performance model," Credit Suisse First Boston analyst Catherine Waters wrote in a research note Tuesday. "The higher (return on investment) delivered by Overture should continue to fuel share acquisition from banner ads and other direct-marketing media, even in a difficult economic environment."
The company is expected to report first-quarter results April 25, and analysts are looking for growth. The average expectation, according to First Call, is for sales of $125.8 million and a profit of 32 cents per share, equal to the amount in earned for all of 2001.
Although the HP deal could help bolster the company's image and bottom line, many investors are waiting to see whether Overture is able to renew its agreement to provide search results for America Online. The company recently extended its relationship with AOL through April 24.
Analysts are hopeful that the deal will be done. Goldman Sachs analyst Anthony Noto wrote Tuesday that "the uncertainty is centered on the length of deal, revenue splits and exclusivity."
"We believe there is a very high probability that the AOL deal will be renewed, which could add $20 to $25 million in (earnings before interest, taxes, depreciation and amortization) on an annualized basis," he wrote.