The Internet directory company also said it will take a fourth-quarter charge of $4 million as a result of the buyout. Yahoo will issue 1.65 million shares of its stock to complete the buyout. It hopes to complete the deal in the fourth quarter.
Privately held Four11 offers free email through a product called RocketMail. It also offers phone and address listings.
As reported by CNET's NEWS.COM in August, Yahoo and Four11 were in talks to provide free email. Yahoo also was talking with Hotmail, but sources had indicated that Four11 had the edge. Yahoo already has turned to Four11 to offer a Net phone directory to its users.
Free email is one of the fastest-growing markets on the Net, and Yahoo's No. 2 competitor, Excite (XCIT), already is offering it. Lycos (LCOS) also began offering free email today. (See related story)
Another financial beneficiary of today's deal is high-tech venture capitalist Draper Fisher Jurvetson. It owns a stake in Four11, as well as Hotmail.
Today's buyout is another example of the cutthroat market for search engine companies. Yahoo is the market leader but it faces competition from established players such as Excite and Lycos, as well as newcomers including Microsoft. (See related story)
"With the acquisition of Four11's core technologies and resources, we are able to expand our communications offerings and provide a broader range of value-added services for Internet users," said Yahoo chief executive Tim Koogle.
Yahoo also announced a deal today to offer its directory on new Compaq computers that are sold. Yesterday, the company said it would partner with Gateway 2000 to bring Yahoo services to the desktop of Gateway computers that feature Microsoft's Internet Explorer 4.0 starting in the fourth quarter of 1997.
In yet another deal, Yahoo also agreed to include TMP Worldwide's Monster Board and online career center in its directory.
Yahoo stock closed at 56-3/4 today, up 1.