January 5, 1998 12:30 PM PST

Softbank, Yahoo fund GeoCities

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Personal Web page provider GeoCities has received $25 million in a deal with Softbank and Yahoo (YHOO), strengthening its chances for an initial public offering this year and putting to rest--for now--rumors of a possible Yahoo buyout.

"We're excited to make this announcement, because it demonstrates that GeoCities will continue as an independent entity in this space," said GeoCities chief executive officer David Bohnett "We're not for sale, and we will continue to be not for sale."

According to Bohnett, the latest investment is a "mezzanine round of financing."

Under the terms of the deals, Softbank is investing a total of $51 million in the community builder, with $25 million in cash going directly to GeoCities and the remainder coming from the purchase of GeoCities shares. Separately, Yahoo is investing an additional $5 million in equity for its interest in the company.

"We are a classic pre-IPO company," said Bohnett, who declined to set a timeline for taking the company public. "We will go to our next stage of growth when we are ready and when the market is ripe."

Yahoo and GeoCities will integrate their member services on their respective sites beginning some time this quarter. GeoCities members will have access to Yahoo navigation throughout all 40 GeoCities "neighborhoods," and will be able to register on GeoCities for Yahoo chat and email services. Yahoo's registered members also will have access to GeoCities Web-publishing services.

For Yahoo, the deal is a next step in its continuing effort to shift its business model from an information-retrieval service to a Web-based online service. Last October, Yahoo acquired online directory and free email provider Four11 for $92 million in stock.

Yahoo faces competition from Microsoft, which recently acquired free email provider HotMail and will be adding the services that company offers to its own lineup of Web offerings. Additionally, America Online has been beefing up its Web-based services recently, and CNET, publisher of NEWS.COM, recently launched Snap Online, a Web-based online service targeting new Internet users that also is looking to move into Yahoo's territory.

"We've gone way beyond the directory services that we started with," said Yahoo chief operating officer Jeff Mallett. "We're making sure that when people come to the Web they have a single place to go to find information as well as people."

Yahoo stock was trading down at 63-7/8 in morning trading.

 

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