Compaq Computer Corp. yesterday sold AltaVista, one of the best-known search engines on the Web, to Internet company operator CMGI, in a deal valued at $2.3 billion.

AltaVista, a Web site that has helped millions of personal computer users search for information online, has been looking for its own path to prominence in recent years as consumer traffic has flocked to "portals." Those sites offer a wider range of services, luring customers to them as their first online stop. Compaq bought AltaVista when it purchased Digital Equipment Corp. last year for $9 billion. As Compaq struggled with its own financial problems, AltaVista drifted.

Recent Internet traffic rankings by Media Metrix Inc. placed AltaVista's search engine 15th among most popular online sites, with fewer than 10 million separate visitors each month. That puts it behind, a greeting-card site, and not far ahead of auction site eBay.

"At Compaq tonight, they should be uncorking the champagne -- because they've been able to unload their AltaVista baggage," said Lisa Allen, senior analyst with Forrester Research Inc., a Massachusetts research firm. "It's not like Compaq doesn't have enough to worry about these days. . . . Now with AltaVista out of the way, they can get back" to the core business, Allen said.

Under the complex deal, Compaq receives 19 million shares of stock in CMGI. In return, CMGI will own 83 percent of AltaVista. Compaq retains a 17 percent stake in AltaVista. It also will get a share of the 40 Internet companies that CMGI operates, including the financial site Raging Bull, (an auctioneer of business products), and CMGI agreed to issue a $220 million three-year note to Compaq as part of the deal; Compaq also gets a seat on the boards of AltaVista and CMGI.

CMGI is expected to spin off AltaVista in an initial public offering of stock and operate it as it does many of the other companies under its corporate umbrella of Web sites and companies offering Internet business services; Compaq hopes to generate sales of its hardware as part of those services through what it called "preferred relationships" with CMGI companies.

The agreement is subject to shareholder and regulatory approval.

In Profile


Business: Invests in, develops and integrates advanced Internet, interactive and database management technologies.

Based: Andover, Mass.

Origins: Traces back to College Marketing Group, a company founded in 1968 to sell names of college professors and their books to publishers.

Employees: 1,020

1998* sales: $91.5 million

1998* net income: $16.6 million

Yesterday's closing stock price: $110.31 1/4, up $12.62 1/2

Ticker symbol: CMGI on the Nasdaq Stock Market

Web address:

*Fiscal year ended in July

SOURCE: Bloomberg News