May 17, 1999 7:30 PM PDT

My Yahoo expanding software features

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Yahoo quietly acquired a small technology firm called Log-Me-On.com for $9.9 million in cash and stock earlier this year, according to a regulatory filing.

Following its January 15 purchase of Log-Me-On, Yahoo has been developing Yahoo Companion, software that attaches popular My Yahoo personalization features--such as stock quotes, email, or news--onto a browser toolbar, according to Yahoo president Jeff Mallett.

Still in beta, Yahoo Companion aims to increase the time people spend using Yahoo personalization services by placing them on the browser, Mallett said. Increased time and page turns--what some call "stickiness"--enables Yahoo and other Web companies to promote greater viewership to advertisers and charge higher rates.

Yahoo has not See related Newsmaker: Jeff Mallett begun actively promoting Yahoo Companion, and it can only be used with Microsoft's Internet Explorer browser. Mallett said the service soon will support Netscape Communications' Communicator browser but declined to give a specific time frame.

Also in its Securities and Exchange Commission filing, Yahoo reported ending its relationship with Canadian cable provider Rogers Cablesystems and warned that @Home's acquisition of Excite could threaten its existing relationship with AT&T's WorldNet ISP.

Yahoo's quarterly filing said the Santa Clara, California, company terminated its agreement with Rogers as of March 1. The companies were previously engaged in codeveloping Yahoo Canada under an agreement the two parties signed in 1996.

With the contract coming to an end, Yahoo let the agreement "run its natural course" and acquired Rogers's stake in the venture, Mallet said. He declined to elaborate.

"Total consideration was $9 million in cash and the issuance of a note payable for $9 million due in April 1999," the filing read.

Today's filing also warned that @Home's acquisition of Excite could "adversely affect our relationship with AT&T," specifically its WorldNet ISP service. Yahoo has an agreement with AT&T to promote a cobranded service in which users get AT&T WorldNet dial-up access with Yahoo as its default home page.

The idea is to bundle Internet access with a portal. But so far, analysts say, such deals have not achieved their goals: higher traffic for the portal and more subscriptions for the ISP.

"The amount of traffic and subscriptions to WorldNet they had hoped for never really materialized," said Abhi Chaki, an analyst at Jupiter Communications.

At the same time, Yahoo is facing increased competition from AT&T now that the telecommunications giant has gathered a slew of broadband cable modem providers and Internet foes, such as Excite, to back its efforts. AT&T is @Home's largest shareholder, and @Home owns Excite. With Excite under AT&T's umbrella, Yahoo could face a conflict of interest if it tries to do deals with cable access services.

Chaki said that the warning in Yahoo's SEC filing could be a hint to the financial community that it may be reconsidering its deal with AT&T.

"This could be their exit strategy to get out of this business relationship," said Chaki.

"They might cite the @Home-Excite relationship, and that may cause Yahoo to pull out of the AT&T relationship," he added. "Either way, there's not really any value there for Yahoo."

 

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