America Online Inc. said yesterday it will acquire mapping and direction service MapQuest.com Inc. in an all-stock deal valued at $1.1 billion.
MapQuest, based in Lancaster, Pa., is the most popular travel site on the Internet, beating out No. 2 Travelocity and No. 3 Expedia, according to Reston-based market research firm PC Data. It offers information on 78 countries in five languages.
Although MapQuest's share price had shot up in recent days--reaching as high as $32.50 on Tuesday--on rumors of the deal, it sank $7.06 1/4 yesterday to close at $25.43 3/4. Analysts said the drop, which brought the company's valuation closer to the purchase price, was likely a correction. AOL shares closed at $83.50 yesterday, down $1.50.
The acquisition is a continuation of the Dulles-based online service's "AOL Anywhere" strategy--its plan to deliver Internet service through devices other than desktop computers. AOL has been seeking to build its interactive content offerings with purchases such as MapQuest and MovieFone, a movie listing and ticketing service. It also has been forming partnerships or making investments in device makers, such as Palm Computing and Motorola.
Earlier this month, AOL bought Seattle's Tegic Communications, a provider of text-entry software for wireless devices, for an undisclosed amount.
AOL President Bob Pittman said to expect AOL maps to be available on smart phones, Palm Pilot organizers and other hand-held devices. He said people won't just look for directions on their computer before they leave the house; they will be navigating as they move throughout their day. The localized maps will include real-time traffic updates.
Maps will be available to subscribers of AOL and CompuServe as well as the company's Netcenter Web site and its ICQ instant messaging service, AOL said. The maps and directions theoretically could be linked to local and regional advertising, which will account for 24 percent of all Internet advertising by 2003, up from 14 percent this year, according to a recent Jupiter Communications report.
"It's another arrow in [AOL's] quiver," said William Whyman, an Internet analyst with Legg Mason's Precursor Group in Washington. And "MapQuest gets the best distribution around."
However, MapQuest, which has 325 employees, does have competitors, including sites MapBlast.com, MapsOnUs.com and Randmcnally.com, the online division of the well-known map maker.
Chris Heivly, vice president and general manager of Randmcnally.com, said the AOL deal "validates that the consumer need for map information is still strong." But Heivly said he thinks the much older Rand McNally name will eventually give his firm the edge.
MapQuest has content deals with a number of companies, including AOL and its rival Yahoo. AOL spokesman Jim Whitney said AOL has no plans to break current deals, including the one with Yahoo.
MapQuest.com shareholders will receive 0.31558 shares of AOL common stock for each of their MapQuest shares. The deal is expected to close in the spring, pending regulatory and MapQuest.com shareholder approval.
Staff writer Ariana Eunjung Cha contributed to this report.
IN PROFILE; MapQuest.com
Business: Provides online mapping and destination information as well as traditional and digital mapping products and services to the educational, reference, directory, travel and government markets.
Clients: Include AAA, Yahoo, National Geographic Society
Based: Lancaster, Pa.
Origins: Began in 1967 as a cartographic unit of a Chicago-
based commercial printer
1998 sales: $24.7 million
1998 net loss: $3.2 million
Yesterday's closing stock price: $25.43 3/4, down $7.06 1/4
Ticker symbol: MQST on the Nasdaq
SOURCES: Hoover's, Bloomberg News