Compaq Catches Net IPO Fever as Time Warner Drops Ball

Jan 27 1999

Why did No. 1 PC maker Compaq decide to spin off AltaVista with a future public offering? CEO Eckhard Pfeiffer's canned statement read: "[It] enables us to unlock the tremendous value of AltaVista for our shareholders." Or perhaps: Give us some of that Net stock "Monopoly" money before Wall Street wises up.

Stories leaking the announcement were widespread yesterday morning thanks to Bloomberg. But, since Compaq made it official at midday yesterday, there were a bevy of second-day stories this morning. The Wall Street Journal played it right, putting the official announcement at the bottom of a story about Compaq's financial results. In fact, although many news outlets ran the story high up, few reporters were able to advance the story beyond the deal details. The exception: The New York Times' Saul Hansell, who reported that the AltaVista IPO plans were announced only after a deal between AltaVista and Time Warner tanked.

According to Hansell's "executives familiar with the talks," Time Warner would have spun out the Web components of CNN, Time and others to Compaq in return for a "big stake in AltaVista." Talks foundered, Hansell reported, because Time Warner didn't want to give up control of content. Why Compaq thought it could do People Online content better than Time Warner is a mystery.

As for Compaq's portal play, most outlets were quick to question the chances for AltaVista, long a favorite for its quick and extensive searches - but lagging in popularity recently while angering loyalists for portal-izing. TechWeb's Malcolm Maclachlan had a nice, overarching analysis of AltaVista's place in the portal wars with a focus on a deal, also announced yesterday, making AltaVista the search technology provider for Microsoft 's portal play. It was the same angle that Margaret Kane took at ZDNet. AltaVista's new CEO Rod Schrock told the Washington Post's Elizabeth Corcoran it wasn't too late to catch up to portal leaders, since it's early in Net time. Look what happened to early PC leaders Altair and Commodore, Schrock told her, belying his PC-centric roots. MSNBC's Jane Weaver strangely said AltaVista could distinguish itself "by focusing on shopping" - as if none of the portals went e-commerce and shopping crazy over Christmas. But Weaver did bring up the possibility that the MSN deal could "deepen into a broader alliance."

Of course, since there was a press conference, some reporters felt duty bound to print a bevy of press-conference-type quotes. Wired News' Craig Bicknell filed an early and pretty strong piece, but let Schrock get away with saying "the goal is to put the business models of Amazon.com and Yahoo together in one whopper of a Web site." and a dollop of AOL ?) Another AltaVista exec told Wired, "We'll track nearly equal to Amazon.com in revenue growth with 10 percent higher margins," but he didn't even hint at what they'd sell besides ads.

Even worse was CBS MarketWatch. Its story was built almost entirely on press-conference happy talk, and analysis like this from reporter Steve Gelsi: "Compaq may be attempting to cash in on Wall Street's love affair with Internet stocks." May be? Don't go out on a limb, Steve. Gelsi did bring up an interesting point, though, with AltaVista saying it would build customer loyalty with speedy search results and not endless click-throughs and "stickiness." That's a welcome change, though it probably won't bring the inflated page-view numbers advertisers crave.

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Washington Post

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MSNBC

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Wired News

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CBS MarketWatch

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ZDNet