June 24, 1999 7:25 AM PDT

Compaq, CMGI confirm AltaVista talks

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Compaq Computer and CMGI today confirmed they are in talks for CMGI to acquire Compaq's AltaVista Web portal.

As previously reported, CMGI would acquire AltaVista. Sources added that the deal may include AltaVista's recently added assets, including Shopping.com and local guide network Zip2.

CMGI is trying to acquire a "controlling interest" in AltaVista, the companies said today.

"The preliminary discussions also include the establishment of a strategic relationship between Compaq and CMGI designed to advance Compaq's Internet strategy," the two companies said.

Both companies said they will not make any further public announcements about the possible transaction "unless and until a definitive agreement is reached."

If the deal goes through, Compaq would become a minority shareholder in CMGI, sources said. The buyout could be worth more than $2 billion, according to CNBC.

Sources said that a deal could be announced by the end of this week.

News of a possible deal first appeared Tuesday in a JagNotes commentary written by Dan Dorfman.

In January, Compaq said it planned to spin off AltaVista for an initial public offering and appointed Compaq veteran Rod Schrock as president. The company then brought on a number of Compaq hardware executives from Houston to manage the site.

But Compaq has had its share of setbacks since announcing those plans. In April, chief executive Eckhard Pfeiffer was unexpectedly ousted from the company, and other executives followed last month. In addition, the company said last week that it expects to report a second-quarter loss after missing Wall Street's expectations last quarter.

The talks also come as AltaVista plans to unveil a revamp of its Web site, due next week. The company will hold a press conference Monday to outline its new AltaVista Network strategy and announce new shopping and search features.

CMGI is an investment firm that takes stakes in Internet companies at an early stage and then helps them go public. Some of its high-profile investments include Lycos and GeoCities.

Reports also have circulated that CMGI has held talks with Lycos over a possible acquisition. Those talks apparently dissolved due to friction between the CEOs of the two firms.

Since about 70 percent of CMGI's assets are spread throughout its investment portfolio, the company might have to be listed as a mutual fund under the 1940 Securities Act later this year, according to sources. But CMGI could avoid falling under the act if it acquires AltaVista.

 

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