Mamma.com Buy Spooks Investors

Early enthusiasm Thursday for Mamma.com ( MAMA) was squelched when the high-flying search engine announced an agreement to acquire an email and pop-up ad provider for an unspecified amount of cash and stock.

Shares of Mamma.com, which more than doubled to $10.10 when the company reported earnings Tuesday, were recently down 59 cents, or 4.7%, to $12.11 in early Thursday trading. The shares had gone as high as $13.23 in the premarket session, getting a boost from improved guidance at rival Ask Jeeves ( ASKJ).

Mamma.com said it entered a letter of intent to acquire Digital Arrow LLC, a privately held company in Delray Beach, Fla., that did about $2 million in revenue last year. The acquisition will be paid for with cash and stock to be determined following a due diligence period.

The company said the additional property will make it a one-stop source for pay-per-click search listings, graphic advertising, customized search results and targeted email marketing.

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