February 16, 1999 7:05 AM PST

Compaq buys Zip2

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Hoping to buy AltaVista's way to the top of the Web portal heap, Compaq Computer today announced it will acquire Zip2, a provider of Internet platform solutions for media companies and local e-commerce merchants.

Privately held Zip2 will become an operating division of AltaVista, a wholly owned subsidiary of Compaq. Zip2's board of directors has approved the cash purchase of all of Zip2's outstanding shares.

Financial terms of the deal were not disclosed, but AltaVista chief executive Rod Schrock said today in an interview with CNET News.com that the company "did pay more than we did for the Shopping.com transaction, which was $220 million."

AltaVista said it hopes the acquisition will allow it to provide localized information and e-commerce, noting that local e-commerce generates 90 percent of all online transactions.

"This is a perfect complementary fit to the current AltaVista direction," said Shrock. "We are focused on a national level on delivering great content and information and e-commerce service.

"And at the local level, we plan to partner with local media companies and extend the Zip2 platform for the local merchants to sell products locally," he added.

Both companies said they expect the transaction to meet regulatory approval.

Zip2 helps develop, host, and maintain consumer Web sites specifically for media companies. Zip2 powers nearly 200 sites, including its flagship arrangement with The New York Times local directory site New York Today. Other media sites include newspapers in the Hearst, Times Mirror, and Pulitzer Publishing chains.

Zip2 also assists media companies and their local merchants in the development of online services for targeted consumers.

The new relationship between AltaVista and Zip2 is unlikely to have any effects on Zip2's current clients, including New York Today.

"We don't expect there to be any changes in the way New York Today operates," said Lisa Carparelli, a spokeswoman for the New York Times.

Last April, Zip2 and CitySearch, a company that specializes in city directories and entertainment listings, said they would merge in a deal valued at more than $300 million. The merger was called off, however, with the companies citing differences in their technologies, product strategies, and business models. Since that time, CitySearch has merged with USA Networks' TicketMaster Online

Shares of Compaq rose 0.3750 percent to 43.375 on the news. The stock has traded as high as 51.25 and low as 22.94 during the past 52 weeks.


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