Market Pans Overture's AltaVista Buyout
Overture, a thriving pay-per-listing search engine that earned $73 million last year, hopes to use AltaVista's technology to help sharpen the relevance of the content on Web sites returned by its search engine. AltaVista once owned the premier search engine on the Web, but slowly surrendered its hegemony to Google after failing to get a $300 million initial offering priced just before the Internet bubble popped in the spring of 2001.
Overture shares were hammered on the acquisition, falling almost 14% to $19.65. Part of the loss reflected ordinary dilution concerns in light of the large stock component of the buyout, but some also worried that the deal could bother some of Overture's partners, who until now hadn't seen the company as a competitor in the straight-search space.
There was also debate about how much dilution the deal would actually cause. Overture will pay $60 million in cash, stock currently valued at $80 million, and will assume some of AltaVista's liabilities, and said only that the buyout will hurt results this year before adding to earnings in the future. A Salomon analyst put the dilution above 5 cents a share.CMGI was up 13 cents to 96 cents in what amounts to a 16% gain for the stock, which once traded at $150.
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