Gifts for $25 or Less Spotify Wrapped Neuralink Brain Chip Black Hole Burps Light of 1,000 Trillion Suns Stamp Price Increase Streaming Services to Cancel Melatonin Rival Monkeypox Renamed
Want CNET to notify you of price drops and the latest stories?
No, thank you

Compaq likely to spin off AltaVista

The computer maker is expected to announce tomorrow that it will spin off the portal with the intention of pursuing an initial public offering, one source says.

Compaq Computer is expected to announce tomorrow that it will spin off its Web directory, AltaVista, with the intention of pursuing an initial public offering, according to a source familiar with the announcement.

A scheduled press conference will center on how the company plans to transform AltaVista and "take it to the next level," Jim Finlaw, a spokesman for Houston-based Compaq, the world's largest maker of personal computers, said this evening.

The announcement comes during a period when Internet stocks have been skyrocketing, with Web portals enjoying some of the highest valuations. @Home last week acquired Excite for $6.7 billion in a stock deal, while in November 1998, America Online paid $4.2 billion for Netscape Communications.

Such movement in the portal space has led to widespread speculation about which portal is next in line for an acquisition or other major deal. Though Lycos was rumored to be partially on the block, chief executive Bob Davis today said the firm is committed to remaining independent. Yahoo also has been the target of acquisition speculation.

An AltaVista spokeswoman declined comment on Compaq's announcement, scheduled for 10:00 a.m. ET tomorrow in New York. Eckhard Pfeiffer, Compaq's CEO, and Rod Schrock, senior vice president of its consumer products group, are slated to speak.

The announcement comes two weeks after Compaq acquired for $220 million in stock, a purchase aimed at further building out AltaVista by integrating's e-commerce capabilities. However, Compaq later lowered its original $19 per share offer to $18.25 per share, following a renegotiation of the deal.

Expectation of a spin-off announcement also was reported by Bloomberg today and the Wall Street Journal, which said the management team will be headed by Compaq senior vice president Rod W. Schrock, who heads the PC maker's consumer products division.

Many industry watchers thought the computer giant would sell AltaVista. Other options could include partnerships with established Web sites or internally developed enhancements to the site.

"Compaq is probably planning to spin-off AltaVista," said John Robb, an Internet analyst with consulting firm Gomez Advisors of Concord, Massachusetts. He said he had no specific knowledge of Compaq's planned announcement tomorrow.

"AltaVista is a prime target for going out and raising a couple of billion dollars in this kind of market," Robb said. "I think Compaq just wants to take it public or take a portion of it public. Here's a chance for everyone to get flush."

But Ashok Kumar, a financial analyst who follows Compaq for brokerage Piper Jaffray, said a spin-off would be premature. Instead, Compaq may announce new strategic partnerships for AltaVista on the road to a potential spin-off.

"They need to build critical mass for AltaVista first," Kumar said.

Kumar also dismissed the chance that Compaq would acquire another top-tier Internet player, citing the rich valuations of many publicly-traded Internet companies. AltaVista became a unit of Compaq when the computer maker closed its acquisition of Digital Equipment last June.

This is not the first time plans have been laid to spin off AltaVista in pursuit of an initial public offering. In August 1996, then-parent company Digital filed with the Securities and Exchange Commission to take AltaVista public. However, the following June Digital canceled its IPO plans for AltaVista due to a restructuring at Digital and an overall cooling of the Internet IPO market.

Reuters contributed to this report.