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Web portals tap Big Blue

Yahoo's announcement of a global distribution agreement with IBM comes on the heels of last week's announcement by competing portal Lycos of a similar deal.

The major Web portals all seem to have the same idea these days--getting a boost from computer behemoth IBM.

In return, IBM also may be trying to get a hand from the portals in its competition against direct marketers of personal computers.

Yahoo, the No. 1 Internet portal, today announced a global distribution agreement with IBM. The deal comes on the heels of announcements of similar deals with Big Blue by portal competitors Lycos last week, and by Excite today.

Under the terms of the Yahoo agreement, IBM's new Aptiva PC line will offer Internet services from Yahoo by connecting to a cobranded My Yahoo start page. That page also will include a customized area for IBM Aptiva PC owners to access proprietary content from IBM, such as news, information about new products, and online customer support services.

The Excite agreement also involves Aptivas that can be directly linked to a customizable Excite Start page

Financial terms of the agreements were not disclosed.

An IBM spokesman said the Yahoo, Lycos, and Excite deals were indeed almost identical to each other, and that the end-user ultimately would be able to decide which of the three sites would be their main page.

Ellen Siminoff, Yahoo's vice president of business development and strategic planning, said that even though the deals are so similar, she believes Yahoo is in a better position to attract the most number of users because of its strong brand name.

The moves have some analysts speculating that IBM may be trying to get a foothold in the direct marketing model of computer sales.

The success of Dell Computer and Gateway 2000 in the direct model prompted Compaq Computer to begin Compaq DirectPlus in November of last year.

"IBM is certainly going down the path to the direct-marketing model," said Gary Helmig, an analyst at SoundView Financial Group. "Dell and Gateway have shown that the direct model pays up, especially in the low mark-up models like Aptiva."

While Dell and Compaq also reach corporate clients, Helmig said he is not sure to what degree IBM will use its deals with Yahoo and Lycos to attract business customers.

"Still, it doesn't preclude reaching corporate clients," added Helmig.

IBM spokesman Andrew Hayden downplayed any long-term implications of evolving toward the direct-marketing model.

"This agreement was not a way to try to sell more boxes, but to personalize the Internet experience for our users," he said.

Last week, IBM kicked off the Computer Electronics Show in Las Vegas with five new Aptiva systems and three new consumer notebooks, all of which have been primed for easy Internet access.

A computer that doesn't come with ready Internet access and some kind of Internet start page soon may not be considered a complete system by consumers, analysts said.

"When someone buys a PC, they will have a check list," said Louis Mazzucchelli, an analyst at Gerard Klauer Mattison. "Has it got a printer? Yep. Got a monitor? Yep."

"Now they'll ask: 'Does it have a starting page?'" he added.

Earlier this month, Yahoo cut a similar agreement with Hewlett-Packard, another PC maker.

"We are thrilled to be working with IBM to further the distribution of Yahoo's programming and services to IBM customers worldwide," said Yahoo's Siminoff.

Lycos saw its stock jump to record highs last week, hitting 95.5 after the agreement with IBM was made public. Shares of the portal were up 44.89 percent higher to 132.94 in afternoon trading today.

Shares of Yahoo surged 17.15 percent to 402.56 in intraday trading today, continuing to reach new highs. The stock has closed as high as 357.38 and as low as 28.81 during the past 52 weeks.

Excite stock soared 34.27 percent higher to 80.56 after the news of its agreement with IBM. The issue has traded as high as 67.75 and as low as 13.88 during the past 52 weeks.

All three portals continue to soar on their similar deals for Aptiva links.

"These guys have escaped all bounds of rationality," said Mazzucchelli.