Compaq spins off AltaVista

Compaq has created a wholly owned subsidiary for its AltaVista Internet search site and plans to take the subsidiary public.

AltaVista, which Compaq acquired when it purchased Digital Equipment last year for $US9.6 billion, will become the cornerstone of The AltaVista Company, according to Compaq executives at a press conference yesterday.

"We're taking a major step to leverage one of the premier assets" Compaq acquired when it bought Digital, said Eckhard Pfeiffer, Compaq's president and CEO.

Having a separate subsidiary for AltaVista will help it focus on making the search and navigation site a key destination for Internet information and electronic commerce, Pfeiffer said. The AltaVista Company will be based in Palo Alto, California and Rod Schrock will be its president and chief CEO, he said. Schrock was most recently senior vice president of Compaq's Consumer Product Group. Company officials declined to say how many employees the new company will have.

Compaq also announced a technology-sharing agreement with Microsoft. Compaq will make an AltaVista-branded version of Microsoft's Hotmail service available to AltaVista users, and AltaVista will be the primary search engine for the Microsoft Network, according to Compaq. The companies will also team on other Web-based communications and community-building services, Compaq said.

Microsoft will phase out Inktomi search engine from MSN, according to a joint statement from both companies.

Compaq executives outlined their plans for AltaVista in rather broad terms. The new company will focus on making its site run faster and on integrating electronic commerce into the user experience, according to Pfeiffer. The vast majority of people who use AltaVista do so to search for specific product information, and Compaq's recent acquisition of online retailer in a stock-for-cash deal valued at approximately $US220 million opens up many possibilities for AltaVista to integrate e-commerce, he said.

Pending the finalisation of the deal, AltaVista technology will be integrated into to deliver information in a "faster, fun, more trusted fashion" for buying products, Pfeiffer said.

Compaq decided to spin out AltaVista because the search engine is a "fundamentally a different business than the computer business of Compaq," Pfeiffer said. AltaVista will go public to raise the money an independent AltaVista will need, he said.

Some of the money raised may go toward acquisitions of other companies and some will go toward maintaining AltaVista separate from Compaq, according to newly appointed AltaVista head Rod Schrock.

AltaVista "will be capitalised sufficiently to have the first year of operations covered," but after that it will be a full-fledged operating company and "Compaq will not be able ... to add contributions to keep AltaVista running," Schrock said.

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