CMGI pays $2.3bn for Altavista stake

Internet Investment company reveals plans to create mega portal.

Compaq revealed last week that internet investment firm CMGI will acquire an 83 per cent stake in portal operation Altavista in a stock swap deal worth $2.3 billion.

Altavista was spun off from Compaq five months ago. At the time, Eckhard Pfeiffer, then chief executive of Compaq, said the division would be established as a publicly traded company with the aim of becoming a leading internet portal (PC Dealer, 3 February).

Dave Wetherell, chairman and chief executive of CMGI, said the company will integrate Altavista into the services of its 40 other Web investments, which include shopping, financial and broadcast, to create one 'mega portal'.

As well as gaining control of Altavista, CMGI will also fold its other units, Shopping.com and Zip2, into the company's portfolio. Wetherell confirmed that the investment firm will take Altavista public 'as soon as possible', but a date has yet to be decided.

Compaq will retain a 17 per cent stake in Altavista and will be the strategic IT supplier to CMGI and its network of internet companies. The vendor will also pre-install Altavista icons on the browser and keyboards of its Presario range.

Ben Rosen, chairman and acting chief executive of Compaq, was quick to point out that the vendor was 'not selling its internet assets or selling Altavista'.

He added that the agreement would enable Compaq to take advantage of CMGI's internet interests to improve Altavista's market awareness.

The deal was applauded by analysts who claimed it would help drive traffic to CMGI's lesser known sites, which include broadcast service, Icast, consumer service, Planet Direct, and family portal, Myfamily.com.

The two organisations also revealed that they would each pump $50 million into building a brand for the revamped Altavista.

As well as plans for the mega portal, CMGI added it has plans to develop specialist portals for businesses.